Offices with superior finishes and more parking space saw the biggest increase in occupancy in the 12 months to June following interest from new occupants and improved tenancy terms, a fresh report shows.
Real estate management firm Broll Property Group said a survey showed the A-grade office space registered an occupancy growth of more than 27 per cent to achieve take-up of 83 per cent from previous 65 per cent.
During the 12 months, landlords were also accepting revenues share as opposed to the typical rental rates based on space and tenants were given longer fit-out periods.
“A-grade office space registered the highest year-on-year occupancy growth of more than 27 per cent from 65 per cent in first half of 2018 to 83 per cent in first half of 2019,” the report says.
A-grade buildings in Nairobi have an average of 2.2 parking bays per 100 metres square whereas B-grade buildings have an average of 1.5 parking bays per 100 metres square. Most of the A-grade office space is located in Westlands and Upper Hill.
B-grade offices, which have less parking space and lower quality finishes, recorded a growth of about nine per cent to reach 88 per cent, from 80 per cent at the end of June 2018.
“B-grade office space registered a lower y-o-y occupancy growth of circa nine per cent from 80 per cent in first half of 2018 to 88 per cent in first half of 2019,” said Broll. Besides new occupants, the manufacturing, pharmaceutical and electronics sectors as well as better terms from landlords had contributed to the rise in occupancy.
“The increase in occupancy levels is largely attributed to increased interests from new entrants coupled with occupiers who are realising their expansion plans mainly from the manufacturing, pharmaceutical and electronics sectors,” said the report.
“This increased demand can also be attributed to the willingness of landlords to consider innovative occupational terms such as the acceptance of revenue share rent as opposed to the typical rental rate based on space occupied, extended fit out periods beyond the standard three months,” said the report.
Landlords were accepting progressive escalation rates instead of the usual fixed rate of up to 7.5 per cent annually.
“Some landlords are now also accepting security deposits of a combination of two months’ rent as a bank guarantee and one month’s rent in cash unlike the traditional three months’ rent cash security deposit,” said the Broll report.