Office space rent in Nairobi declined 13 percent last year, making Kenya’s capital the cheapest among top African cities, a new survey has shown.
The Knight Frank report shows that office space in Nairobi on average went for Sh1,308 per square foot in the second half of last year, down from 1,478 amid the Covid-19 economic fallout.
This compares to Kinshasa (Sh3,815), Accra (Sh3,052), Johannesburg (Sh2,009), Cape Town (1,860), Addis Ababa (Sh1,744), Dare Salaam (Sh1,635) and Kampala (Sh1,526).
Harare, which is still struggling from economic decay that came with former President Robert Mugabe regime, was bottom of the pile with an average rent of Sh763 per square foot.
“Prime office rents in Nairobi declined by 13 per cent in second half of 2020 compared to the first half 2020 with average occupancy rates across commercial offices recorded at approximately 72 per cent in the same period,” said Knight Frank.
Nairobi, which hosts offices for key multinationals and is a key regional hub, implemented lock-down measures last year and encouraged office workers to work from home.
The shut-downs affected the ability of businesses to pay rent increasing office vacancy and leading to the fall in rents, said Knight Frank.
The report says many firms in Nairobi shifted to smaller fitted out office spaces as flexible working patterns became the ‘new normal’. This saw landlords grant concessions on lease renewals which included cutting rents in a bid to attract and retain tenants.
The same was reflected in other African cities which many firms increasing downsizing activities, postponing office take up decisions and shifting to smaller fitted out spaces.
“The last half of 2020 saw majority of Africa’s regional economies ending the year in recession and activity across the prime office markets remaining relatively muted. As a result, demand remained subdued with prime office rents across the markets tracked by Knight Frank declining by 11 percent on average in the year to December 2020,” said Knight Frank.
While some firms are pushing for people to return to the office, many companies are fully embracing remote work amid a resurgence of Covid-19 cases, in what Knight Frank predicts could further deal a blow to office occupancy rates hitting rents.
“In general, we anticipate that the office market will remain subdued over the course of 2021 with earlier signs of recovery only expected in the last quarter of the year. However, we expect that the increased occupier activity in major hotspots such as Nairobi will continue,” said Knight Frank.
The Health ministry on Monday reported 1,130 new infections and 12 Covid-19 deaths in Kenya, as the country fights the most aggressive stain yet.