Rent for office space and luxury homes in Nairobi has dropped due to oversupply and an exit of expatriates, a real estate consultancy’s survey shows.
Knight Frank Africa in a report highlighting real estate trends on the continent says that an oversupply of office blocks has seen the average cost of prime leasing space drop 20 per cent $16 (Sh1,648) per square metre a month over the past two years.
Rent on high-end homes preferred by expatriates has dropped with leasing costs of four-bedroom executive houses falling 13 per cent to $4,100 (Sh422,300) per month. The falling rent looks set to hurt high-net worth investors like pension schemes and insurance companies which have spent billions of shillings on office blocks, changing the skyline of zones like Upper Hill.
Real estate investors and buyers of Treasury and corporate bonds have recently emerged as the biggest gainers in terms of return on investment amid a bear run in the stock market.
“The high levels of new supply of commercial office space have negatively affected rental levels and occupancy rates,” said Knight Frank in reference to Kenya.
“Luxury homes sale prices increased marginally, but prime rental prices declined as a result of a slight oversupply, which has been partly attributable to the exodus of a large number of expatriates following the downsizing of Kenya’s oil extraction industry.”
Kenya became a hot spot for oil and gas exploration in the years after 2012, spurred by new finds. British explorer Tullow Oil and its partner Africa Oil first struck oil in Lokichar in Turkana in 2012. Recoverable reserves are estimated at 750 million barrels of crude.
Rent in malls has stagnated on increased supply, while leasing costs of industrial space has increased 11 per cent to $4.7 (Sh484) per square metre a month, says Knight Frank.
Kenya has a scarcity of high-end industrial space.