President William Ruto's administration is considering shifting from leasing offices to purchasing property and building its own units to cut costs in a plan likely to hit commercial property landlords hard.
The Treasury has disclosed in a new report that the government is prioritising the construction of new offices over renting, citing public concerns over the high cost of leasing in high-end commercial locations.
“[The government will] consider one-stop shop for all government agencies. The Public Administration and International Relations sector has prioritised the construction of offices as opposed to hiring including foreign missions,” the Treasury wrote in the draft 2025 Budget Policy Statement.
Currently, the Housing ministry considers offices in prime locations such as Community/Upper Hill, Westlands, the Central Business District (CBD), Hurlingham, Kilimani, and Milimani in Nairobi as ideal for State ministries, departments, and agencies.
This was, however, a subject of concern for taxpayers during the public participation in the preparation of the fiscal budget for the year starting July because of the high cost of leases involved.
The plan to build new office buildings, however, comes with the risk of cost overruns and delayed completion times as was the case with Bunge Towers which was constructed for Sh9.2 billion over 14 years.
The shift away from leasing is being considered at a time developers of commercial office buildings have been struggling to find tenants for their properties.
A 2024 real estate survey by the Kenya National Bureau of Statistics, for example, found that while office spaces constituted nearly two-thirds of advertised commercial properties for lease, they were the least rented, largely because of the lack of clients.
About a third (34.4 percent) of the office spaces advertised for renting in 2023 remained unoccupied due to poor demand, the highest rate of unrented space of commercial property types on the market.
“Commercial properties advertised for rent may not be rented out due to various reasons, such as lack of clients. The survey findings indicated that over 50 percent of all commercial rental properties that were on offer for rent in 2023 were rented during the year,” the KNBS wrote in the report.
The high cost of leasing offices for State agencies has been a concern for more than half a decade, with the Treasury in the past pointing out that it was unsustainable.
The government spends upwards of Sh5 billion every year on hiring office space, with past data showing the cost of rentals for buildings leased by the State rose to Sh5.9 billion for the year ended June 2018 from Sh5.4 billion a year earlier.
“The government has been leasing office space at higher market rates, resulting in huge costs to the government,” said the then Treasury Cabinet Secretary Henry Rotich in the budget speech in June 2019.
The plan at the time was to standardise procurement of office accommodation by government with uniform cost leases, while existing contracts were to be renegotiated to ensure a standard rate.
Housing Principal Secretary Charles Hinga did not immediately respond to our enquiries regarding the outcome of the process to standardise lease rates.
The Foreign Affairs ministry accounts for the largest share of the expenditure on rent for leasing offices and homes for Kenya’s envoys abroad.
The ministry has in recent years been leaning towards construction and purchase of spaces for the missions abroad as opposed to leasing.
For instance, Kenya is in the process of completing purchase of a chancery in London for Sh2.67 billion to ease the costs of lease, which were in the upwards of 350,000 pounds (about Sh56 million) a year.
Countries where Kenya is either building or purchasing property for its envoys include New Delhi (Sh2 billion), Stockholm (Sh1.6 billion), Geneva (Sh1.3 billion), Juba (Sh1.5 billion), Berlin (Sh1 billion), Kigali (Sh750 million), Bujumbura (Sh500 million), Mogadishu (Sh350 million) and Pretoria (Sh50 million).
The government adopted leasing as an alternative to acquiring assets, including vehicles, without incurring high upfront costs and associated recurrent costs such as insurance and maintenance.
The previous administration of President Uhuru Kenyatta, for instance, was heavy on leasing vehicles especially for security agencies. The multi-year car leasing programme was designed to provide efficient and cost-effective transport to the government extension workforce by providing cheap access to vehicles.
Studies and audits commissioned by the Treasury have, however, revealed some gaps in the leasing scheme, which hindered its optimal performance, including a lack of an effective management structure that guarantees operational efficiency.
The vehicle leasing programme was projected to save taxpayers Sh4 billion every year, but findings of a study commissioned by the Treasury suggested in November 2022 that savings averaged Sh70 million a year.
The study showed the Jubilee government saved Sh638 million in nine years under the vehicle leasing deal that it had banked on to trim heavy upfront acquisition costs and check run-away maintenance costs.
“The absence of a standardised leasing framework has resulted in inconsistencies in leasing practices across ministries, departments, agencies (MDAs), and county governments,” the Treasury wrote in the 2025 BPS earlier this month.
“The National Treasury, therefore, is in the process of developing a comprehensive leasing framework that will provide clear, standardised guidelines and processes for the leasing of government assets across all public sector entities.”