Multinational companies' demand for Nairobi office spaces has significantly declined due to the current economic conditions.
In Knight Frank's Kenya Market Update report covering the second half of 2023, multinational corporations were reported to have slowed down on interest for the offices mostly located in Nairobi's posh estates.
According to the report, the latest trend was also occasioned by the shift in office operations that were created during the global pandemic.
For instance, it detailed that many companies adopted remote working cultures. Consequently, with workers working from home, many companies were not interested in renting new office outlets.
"In recent times, demand has waned mainly due to the challenging economic conditions that were precipitated by the pandemic. One of the primary impacts of the pandemic on the office sector was the transformation to flexible workspaces.
"As organisations transitioned back to the workplace post-pandemic, there was a shift towards adopting flexible workspaces and remote working arrangements. Consequently, companies have gradually embraced these changes, leading to an expansion in the presence of flexible workspace operators," read the report in part.
Additionally, owing to the decline in demand, it was reported that monthly prime office rent stagnated at USD 1.2 per square foot.
Given the latest trend, landlords were also being forced to adopt new rent strategies to survive in the harsh economic times.
"Due to the persistent loss of purchasing power of the Kenyan shilling against the USD, landlords face losses when collecting rent in Ksh while servicing dollar-denominated loans. In response to this exchange rate challenge, landlords have increasingly favoured collecting rent in dollars, a trend expected to continue in the long term," the report highlighted.
Nairobi has in recent years been the hub for offices with multinational companies, diplomatic entities and government agencies setting shops in various estates within the city.
Particularly, Upperhill, Mombasa Road and Westlands have been the major lucrative spots for these organisations.
However, despite the reduced demand, Westlands remains the most preferred spot for companies still opting to set shop in Kenya. This is mostly attributed to the facilities offered in the commercial estate.
"Throughout the review period, Westlands - known for its dominance in A-grade office space in Kenya, solidified its reputation as the premier office hub by welcoming new flexible workspaces branches such as Regus, Spaces, and Ikigai," read the report in part.
