A report by real estate firm Knight Frank has revealed that companies are shying away from renting office space despite rent remaining stagnant.
In the report that covered the second half of 2023, it was noted that the office occupancy rate dropped from 75 per cent to 72 per cent.
It was explained that the trend was occasioned by a shift in focus for the companies whose CEOs are focusing on priority operations costs other than renting office spaces. This trend was attributed to the performance of the economy.
Therefore, with the glut in office space within the capital, landlords were forced to maintain the rent rates.
Offices within Nairobi used by multinational companies are mostly based in posh estates such as Upperhill, Westlands, and estates along Mombasa Road.
"The monthly prime office rents have remained unchanged at USD13 (Ksh2,097) per square meter throughout the last half of 2023. This stagnation can be attributed to an enduring oversupply of offices and the prevailing challenging macroeconomic environment.
"As a result of these economic challenges, many organisations are putting their office space requirements on hold, diverting their focus towards operational priorities rather than capital expenditure," read the report in part.
On the other hand, CEOs were reported to be focused on having co-working spaces as they were more cost-efficient.
"This downturn has witnessed a local currency depreciation of nearly 24% against the US dollar in the past year, intensifying the need for cost-effective workspace solutions.
"The collaborative nature of co-working arrangements aids in distributing office space expenses across multiple occupants, thereby reducing overheads," the report added.
However, despite the decline in office occupancy, Westlands remains a lucrative destination for companies, especially big organisations.
This was attributed to the demand for Grade A offices. Grade A offices are offices that have unique architecture and a vast range of amenities such as parking, gym, security, and lifts. The offices are also closer to the Central Business District (CBD).
Notably, various office buildings have been put up in the last five years in Westlands including the Global Trading Center (GTC).
Offices that adapt to Environmental, Social, and Governance (ESG) standards have also made Westlands attractive. These offices minimise costs for energy expenditure as they incorporate energy-efficient technologies in the design.
This is why many offices in Westlands are glass-walled.
