With majority of organisations ditching working from home, there has been increased demand for office space in the first six months of 2024, majorly driven by co-working operators and Business Process Outsourcing (BPO).
New findings by real estate firm Knight Frank show that the first half of 2024 has seen a notable shift back to physical office spaces, with many organisations favouring traditional offices over the work-from-home model.
This shift has fuelled the ongoing expansion of the flexible workspace market in Nairobi.
Co-working spaces are communal work environments that provide individuals with a shared space to work on their projects or businesses. These spaces offer a variety of amenities, such as Wi-Fi, printer access, coffee, and a collaborative atmosphere.
Knight Frank Kenya's CEO, Mark Dunford says that the trend is a shift in Kenya's commercial real estate market, with flexible workspaces and BPOs emerging as key drivers of office space absorption.
“This has driven the expansion of flexible workspaces, exemplified by IWG's new offices at Pramukh Towers and Kofisi's partnership with Workshop17 that increased workspace area to 645,835 square feet,” said Dunford
“Horizons, another prominent co-working operator, opened a new location at the Two Rivers International Finance and Innovation Centre.”
Knight Frank says that developers in Nairobi have been leveraging differentiation strategies, such as obtaining green certifications, to attract a premium from multinational corporations (MNCs), who are increasingly focused on sustainability and environmental impact.
However, supply in the prime office market remains limited, creating an opportunity for strategic investors.
The significant decline in the supply of prime offices in 2024 has been neutralised by the historical oversupply of these prime office spaces. Consequently, rents and occupancy rates are expected to continue remaining stable in 2024.
Kenya's prime office occupancy rate grew to 75 per cent in the review period compared to 71.5 percent a year earlier, helped by reduced supply of new units in a market that has suffered glut for years.
Nairobi's office sector, prime rents remained stable at $1.2 (Sh155) per square foot per month, with prime offices achieving an occupancy rate of 77.2 percent as of June 2024.
Prime residential market has also shown resilience, with sale prices increasing by 6.2 per cent and monthly prime rents rising by 2.25 per cent.
Buyers are increasingly seeking value for money, prompting developers to offer high-quality residences that meet the expectations of a more discerning clientele. Branded residences remain in high demand, attracting affluent buyers interested in luxury and exclusivity.
Kenya's industrial sector experienced growth, fuelled by the country's rising population and increasing demand for commodities.
Knight Frank Kenya Senior Researcher Charles Macharia says that Kenya's path to industrialisation and economic growth relies heavily on industrial sectors and infrastructure, particularly through the creation of SEZs and EPZs.
“While advancements in technology and connectivity bolster its position as Africa's Silicon Savannah, challenges such as high public debt and climate resilience must be navigated to achieve sustainable development and improve the livelihoods of its citizens," said Macharia.
The retail sector has seen a shift in focus towards locations closer to residential areas, driven by evolving consumer spending habits and the rise of e-commerce. Major retailers like Quickmart and Naivas have continued to expand, opening new outlets across the country.
Prime retail rents in established malls have remained robust, ranging from Sh600 to Sh700 per square foot per month.
