There is a looming glut of office space in Nairobi which could leave close to a fifth of the city’s newly built offices vacant by the end of 2016. Speaking during the release of Nairobi Office Market Report for the second half of 2014, real estate investor Mentor Management Limited (MML) CEO James Hoddell said that Upper Hill and Westlands will be the most affected areas in the oversupply.
“By the end of 2016 we predict there will be over 2.8 million square feet of office space. This excess supply of office space is expected to originate from Upper Hill and Westlands in 2015 and 19 per cent of the total stock of new buildings delivered since 2009 will be lying vacant,” he said.
MML’s research arm grouped regions into ‘nodes’ based on conglomeration of offices in the areas, identifying nine nodes in and around Nairobi as the city moves towards a structure built around multiple centres and away from its historic form of a single-centre city. The best performing office markets for 2014 were Kilimani which enjoyed 84 per cent take up on the new offices delivered with Westlands coming second at 71 per cent.
In terms of rents, Westlands and Upper Hill tie at 17 per cent. Westlands offices now average at Sh117 per square foot and running as high as Sh220 per square foot, while average office rents rose from Sh90 to Sh105 per square foot in Upper Hill. The year has also seen bourgeoning of office building in the city’s outer suburbs with Gigiri, Thika Road and Karen accounting for more than a quarter of all new office buildings delivered in and around Nairobi this year.
The report reveals that absence of ample parking is a major push-away to tenants seeking to occupy offices within the CBD, prompting them to look for offices along Thika Road, Karen and Gigiri. These nodes are in the ‘rising phase’ while Mombasa Road and CBD offices are losing tenants due to lack of parking spaces.
“The absolute determinant in how quickly office buildings are filling beyond the baseline of the location and quality of the building is the availability of ample parking. Only one in every 20 offices within the CBD meet the minimum international standards of parking yet there is an outright relationship between ample parking and speedy uptake,” noted Mr Hoddell.
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