Office space suffer 34pc vacancy on weak demand

Uptake of the office spaces has been low as some companies introduce hybrid working models where the number of days workers report to office has been reduced.

Photo credit: Fotosearch

Commercial property owners who have invested in office spaces are finding it rough as companies cut office usage to save on costs, reducing demand as 34.4 percent of available space remained untaken.

A new real estate report by the Kenya National Bureau of Statistics reveals that in 2023, while close to two-thirds (63.3 percent) of commercial properties that were advertised for leasing were office spaces, they attracted the lowest demand from the market.

Uptake of the office spaces has been low as some companies introduce hybrid working models where the number of days workers report to office has been reduced, a strategy adopted since the Covid-19 pandemic times to save costs.

“The survey findings indicated that, more than half (63.3 percent) of all advertised rental commercial properties for rent were office buildings/ spaces, followed by retail premises at 16.1 per cent,” notes the 2024 Real Estate Survey report.

During the year, the survey established, 7.7 percent of advertised commercial spaces were in malls, 7.2 percent were in industrial and warehousing properties, 2.6 percent in special purpose properties and 1.7 percent in hotels and other properties in the hospitality sector.

“Suites or condominiums were the least at 0.5 percent,” the survey said.

While office spaces constituted nearly two-thirds of advertised commercial properties for rent, they were however the least leased, with the report attributing lack of clients as a big cause.

Of all the office spaces advertised for renting in 2023, a third (34.4 percent) remained unoccupied at the end of the year due to poor demand, which was the highest rate of unrented space of any commercial property types.

“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 survey notes.

While office buildings had 65.6 percent of the properties they advertised rented out, industrial/warehousing properties rented out 81.8 percent of advertised properties, 84.6 percent of the hotels advertised were rented out and 98.3 percent of advertised spaces in malls were taken.

A growing number of companies are putting their employees on working schedules where they are required to report to office only two or three days a week, a change that is turning into a nightmare for investors in office buildings, which are being left vacant.

A 2022 survey by the International Labour Organization (ILO) and the Federation of Kenya Employers (FKE) established that about half of companies expected to continue with the hybrid working approach in their operations after the Covid-19 pandemic, mainly to save costs.

“In the coming years, many enterprises – about half of the ones we surveyed - expect to continue a hybrid approach to work. Enterprises noted that hybrid workplaces can save costs on office space while still allowing human interaction,” the report stated.

The Real Estate Survey notes that in 2023, suites/condominiums and special purpose premises had the highest advertised monthly rent per square foot at Sh140 and Sh150 per respectively.

Average monthly rent for office buildings was Sh106, for hotels was Sh105, malls charged Sh100 and retail spaces Sh115.

The prices varied based on the type and location of the property. 

“Analysis of service charges by type of commercial property revealed that industrial and warehousing properties had the highest service charge, averaging Sh29,047.8 per month in 2023, followed by malls and mixed-use properties with an average service charge of Sh15,746.1 per month. Suites/ condominiums had the lowest service charge averaging Sh4,576.9 per month. The average monthly service charge for office spaces was Sh6,673.2,” the report notes.


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