County offices plan opens doors for private firms

• Investors would be given public land to develop office space on and recover the costs through rents over an agreed period of time before handing over the property to the government.
• Gikonyo Gitonga, the managing director of real estate firm CBRE, said such partnerships would open huge opportunities for private developers.

Devolution is opening new opportunities for property developers, with the government planning to engage them in partnerships to build county offices.

Housing Permanent Secretary Tirop Kosgey said investors would be given public land to develop office space on and recover the costs through rents over an agreed period of time before handing over the property to the government.

“We are looking at a build-operate-transfer model to meet the expected deficit in office space,” Mr Kosgey said. The government hopes that the public private partnerships will help contain rental expenses from the next financial year while reducing budget allocations towards building the quarters.

Previous hopes that blocks held by local authorities, ministries and departments would absorb the manpower being redeployed to the counties have been dashed by the many independent commissions that will also be operating at the county level.

“The deficit is expected to rise significantly next year,” said Mr Kosgey, adding that the government is currently letting an estimated 1.6 million square feet of office space at an annual cost of Sh3.2 billion.

Gikonyo Gitonga, the managing director of real estate firm CBRE, said such partnerships would open huge opportunities for private developers.

“This model presents huge business opportunities for the private developers. It is like a mortgage arrangement where the government is the buyer,” said Mr Gitonga.

Switching to the build-operate-transfer (BOT) structure represents a major shift for the government, which has in the recent past relied on renting space for its growing number of agencies and in some instances, outright acquisition. In the current financial year, the State expects to acquire at least four commercial buildings in Nairobi’s Central Business District at an estimated cost of Sh6 billion.

So far, Sh1.2 billion has been set aside as down-payment for two commercial buildings owned by the national retirement fund, NSSF while an additional Sh1.6 billion will be paid to the Hazina and View Park towers, closing the Sh2.8 billion transaction.

Parliament also plans to acquire two buildings owned by co-operative societies at the ‘Parliament Square’ as it prepares to house its expanded membership, beginning March next year.

The National Assembly will purchase Harambee Sacco Plaza and the adjacent Ukulima Co-operative Building, the last two privately owned buildings around the ‘Parliament Square’ with a joint space of about 110,000 square feet.

Mr Tirop said the State would invite developers in various towns to provide housing based on results of an audit commissioned to determine the additional space requirement by all government agencies.

The BOT model would be enforced through the recently approved legislation on private-public partnerships, which require the State to advertise the opportunities before the tenders are awarded for the developments. 

The developers would earn rental income, payable in advance twice a year, likely to be at a premium compared to the average market prices to accelerate the amortization.

The new approach is also expected to help the government bridge a widening deficit for office space, amidst rising demand as the devolved structure takes shape after the March 2013 elections.