Kenya's Prime Office Market Faces Oversupply as Major Projects Complete

Kenya’s prime office occupancy rate has experienced a significant decline, falling from 77.2 percent in the first half of 2024 to 72.7 percent in the latter half.

This is as highlighted in the latest report by Knight Frank Kenya. This decrease is largely attributed to the influx of new office space entering the market. Developments along Mombasa Road, Kilimani, and Westlands have added over 522,000 square feet of prime office space, including notable buildings such as Purple Tower, Highway Heights, Matrix One, The Mandrake, and Museum Hill Towers.

The introduction of these new units has led to downward pressure on occupancy rates, culminating in the observed decline. Westlands, historically Nairobi’s primary office hub, continues to attract developers, resulting in an increased supply of co-working spaces. Established providers, including Regus, Ikigai, and Spaces, have expanded their portfolios in this desirable location.

Nevertheless, Knight Frank projects a potential downturn in future office space supply. The easing of Covid-19 restrictions has prompted a global surge in demand for office spaces, with Kenya expected to follow suit. There is a marked preference for in-office work arrangements over remote alternatives, which reflects the unique characteristics of the Kenyan market relative to international trends.

During this review period, the flexible office space provider Workable has secured an additional 12,000 square feet at Sanlam Towers in Westlands, indicating a gradual shift in workplace dynamics. Interestingly, despite the increase in available office spaces, monthly prime office rents have remained stable at Sh145.4 ($1.2) per square foot, excluding taxes.

Meanwhile, the sales market has seen a lull, primarily due to elevated asking prices. For example, the Central Bank Pension scheme has placed Timau Plaza and Twiga Hill Park in Nairobi on the market for Sh1.08 billion.
Since 2010, Kenya's office space landscape has undergone substantial growth, particularly in Grade A office supply.

As the country solidifies its status as a regional hub for international investors and corporations, areas such as Upper Hill and Westlands have expanded, drawing businesses away from Nairobi's central business district (CBD), which remains limited in Grade A offerings.