•Oversupply and a general economic slowdown impacted the property market.
•Tenants had the advantage in retail leasing owing to the continued oversupply of shopping mall spaces.
Buyers and tenants maintained an upper hand in the real estate market throughout 2019, Knight Frank’s Kenya market update has shown.
This saw bargains in deals as oversupply and a general economic slowdown impacted the market.
Prime retail rents decreased by 4.2 per cent to Sh 465 per square foot per month in the period, pushing the cumulative decline to 9.8 per cent in 2019.
Tenants had the advantage in retail leasing owing to the continued oversupply of shopping mall spaces.
Occupancy levels in retail averaged 77 per cent, although established malls such as The Junction recorded vacancy levels of less than 10 per cent in the last six months of the year.
“Landlords are increasingly having to make concessions to remain competitive, including giving longer rent-free periods, reduced rents and escalations,” said Ben Woodhams, Managing Director at Knight Frank Kenya.
In the commercial office market, Grade A office rents remained unchanged at an average of US$1.3(Sh 130)/sq.ft./m in the second half of 2019.
However, absorption of Grade A and B office space in Nairobi increased by 41 per cent compared to the uptake in the first half, as fewer but larger deals were concluded.
This was primarily driven by a flight to quality stock and increased demand from co-working space operators.
Occupancy levels in retail averaged 77 per cent, although established malls such as The Junction recorded vacancy levels of less than 10 per cent in the last six months of the year.
Prime residential prices in Nairobi fell by 4 per cent in 2019, a slower pace compared to 4.5 per cent in 2018.
Price stability in the prime residential segment in the second half of 2019 saw more deals closed before year-end, with sellers becoming more realistic with regard to pricing.
Prime residential rents, on the other hand, decreased by 2.8 per cent in 2019, compared to 1.3 per cent in 2018 as oversupply continued to tilt the market in favour of tenants.
It is anticipated that the repeal of the interest rate cap will boost liquidity in the market, which would subsequently be felt in the recovery of prime residential rents and values.