Tenants occupying various commercial spaces in Westlands, Kilimani, and Karen would be forced to pay more due to landlords' demand for rent in US dollars.
According to Cytonn 2023 Market Outlook, Nairobi business people and companies occupying retail office spaces would be subjected to a 1.5 per cent rent increase.
Explaining the increase, Cytonn, a real estate company, attributed the sharp rise to the weakening effect of the Kenyan shilling against US dollar.
"Most prime retail spaces in Kilimani, Karen and Westlands fetching rents in dollars will continue to increase upon conversion to Kenyan shilling due to the ongoing depreciating Kenyan shilling against the dollar," the report read in part.
According to forex experts, Kenya shilling lost approximately 25 per cent of its value against the US dollar from 2020, falling from Ksh99 to Ksh124.
Forex traders further attributed the shilling weakening to increased dollar demand from oil retailing companies and general goods importers.
With the Kenyan shilling uncertainty, developers and landlords in retail space started collecting rent in dollars to protect their businesses from losses.
Besides the weakening Kenyan shilling against US dollar, Cytonn's report noted that the improved business environment was key to compelling landlords to increase rent by 1.5 per cent.
Despite the increase, the report noted that landlords would reap due to increased occupancy.
"We expect the occupancy rates to improve slightly by 0.9 per cent points mainly attributed to the resumption of working from office policies by most companies and reduced developments expected to enter the market in 2023," the report read in part.
"This we expect will boost absorption rates, potentially increasing occupancy rates," it added.
With the real estate recovering from the effects of the pandemic, Cytonn indicated that investors would move to lower satellite towns in Nairobi to set up more detached houses due to affordable land prices.
