High end offices to survive rent income scare
OVERSUPPLY of commercial space in Nairobi is projected to apply breaks on growth in rental charges, a new study shows.
The report by real estate firm Mentor Management suggests that property market in the capital is experiencing growing vacancies in commercial spaces amid dwindling inquiries from potential occupants.
The latest issue of the Nairobi Office Market Update Report however says demand for high-end space in strategic locations is still likely to experience a growth in rental fees.
The company said its findings show supply of commercial office space in Nairobi is expected to increase by 54.5 per cent to an estimated 2.8 million square feet by the end of this year from 1.8 million square feet in 2014 due to rising investments in the building and construction sector.
Building plans approvals in the capital during the second quarter of 2015(April to June) totalled 4.69 million, a 19.33 per cent jump compared with 3.93 in the same period last year, the Mentor Management report says.
“Despite the expected increase in supply in 2015, there is continued undersupply of grade A office space in Nairobi with grade A office space expected to account for 34 per cent of space to be delivered in 2015,” the firm says. “An analysis of 41 new buildings to be delivered in the next three years reveals that only 24 per cent (10 buildings) of them are expected to meet the acceptable parking levels of three parking spaces per 1000 square feet of office space.”
According to the report, Westlands and Kilimani continue to be the most preferred for tenants with take up levels of 82 and 80 per cent in 2014.
Average asking rents for 2015 are six per cent higher across the Nairobi office market than in 2014 with Westlands and Waiyaki Way registering highest growth of eight and seven per cent, respectively.
“Grade A offices continue to attract higher rents than Grade B, with Gigiri recording the highest average asking rent of Sh150,” the report shows.
The average price for fractional office space in Nairobi is Sh13,702 per square foot. The highest priced space is along Waiyaki Way at Sh14,250 per square foot, followed by Kilimani and Ngong Road at Sh14,243 per square foot
– Source: the star