Developers saw a rise in office space uptake for the first half of the year as a recovering economy boosted business activity, a report by property management firm Knight Frank says.
The firm says absorption of Grade A and B office space rose by 12 per cent in the six months compared to the second half of 2017, with the overhang of supply witnessed in 2016 and 2017 starting to ease.
Competition for tenants, however, means the developers have had to contend with a slight fall in asking rent per square foot at about Sh110 to Sh130 for Grade A and Sh80 to Sh110 for Grade B offices, despite the higher uptake. In the second half of last year, Grade A rent went up to Sh140 per square foot.
“What we have seen is empty space being absorbed in the market. There was an oversupply in 2016 and 2017, mainly due to the political situation that had affected business activity,” said Knight Frank Kenya managing director Ben Woodhams yesterday.
“Although rent did not go up in the first half, we expect it to record a recovery in the second half mainly due to economic recovery and take-up of existing space specifically in prime buildings in the right locations.”
The prolonged politics in 2017 saw business people adopt a wait-and-see attitude towards new investments and expansion, which in turn filtered through to the real-estate segment in form of reduced demand for space.
Developers cut their activity as well, with the value of approved building plans dipping to Sh20 billion in the third quarter of 2017 from Sh66 billion in quarter two. They, however, rose again to hit Sh60 billion by the end of the first quarter of this year.
This had also affected the prime end of the residential housing market, the Knight Frank report shows, where prices had fallen by 1.8 per cent in the second half of last year.
In the first half of this year, the price has had a modest rebound, growing by 0.4 per cent.
In the retail space, rent remains flat at about Sh55 per square foot, with occupancy at about 90 per cent for established malls and between 60-75 per cent for new ones.