Office rent rates in Nairobi are expected to continue spiraling downwards according to a recent report released by accounting firm Deloitte.
In the report dubbed Economic Impact of the Covid-19 Pandemic on East African Economies, it was indicated that the rental rates have significantly reduced since the pre-pandemic period of 2019.
Divided into two categories, the office rent rates reduced from Ksh950 (USD 9.5)per square metre in 2019 to Ksh880 (USD 8.8) per meter in 2020 and is expected to reduce to Ksh870 in 2021.
Retail rental rates, on the other hand, reduced from Ksh 1,620 per square meter in 2019 to Ksh 1,480 per square meter in 2020 and is expected to drop to Ksh 1,460 in 2021.
"Kenya’s real estate sector growth has been turbulent over the past 5 years, ranging from a high of 12.2% growth in 2016 to a low of 5.6% growth in 2018.
"The sector posted a growth of 8.3% in 2019 and is estimated to have had a paltry 1.0% growth in 2020 owing to a persistent supply glut and dampened demand," read the report in part.
According to the report, by Q2 of 2020, 30.5% of Kenyans who rented houses were unable to pay their rent on time due to severe effects of the pandemic on the economy.
Other severe consequences witnessed in 2020 include a slowdown in collections for off-plan real estate purchases on installment plans and in building approvals as public offices remained closed.
House prices contracted by an estimated 0.2% in 2020, attributable to the economic slump which affected both demand and supply in the residential market.
The Industrial sector, on the other hand, experienced a stagnation of rental yields in 2020 as a limited supply of prime stock was met by a lack of development activity in the industrial market.
"Infrastructure development and the integration of new industrial economic zones is expected to spur demand for industrial space between 2021- 2024. Consequently, industrial rental rates are expected to rise to Ksh 370 (USD 3.7) per square meter in 2021.
"The completion of Phase 2A of the Standard Gauge Railway and the construction of an inland container depot in Naivasha is also expected to catalyse growth in the sub-sector between 2021-2024," added the report.
A report by Cytonn Investments in April 2021 indicated that the number of offices that had remained vacant due to the negative effects of the pandemic had shot up.
The report noted that there was oversupply of office space in 2020 of 7.3 million square feet (SQFT) rising from 6.3 million SQFT in 2019.
That was due to a reduction in demand coupled by the completion of a plethora of buildings within the city.
“Since the emergence of the pandemic in early 2020 which was followed by lock-down measures, companies restructured and adopted remote working which led to a decrease in occupancy levels in the commercial office sector,” read the report in part.
