Last Updated: 2018-03-14
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An NNN-KBC Special Report by O'Brien Kimani

NAIROBI, March 14 (NNN-KBC) -- Kenya’s the real estate sector is facing the harsh reality of an over-abundance of office space and few tenants after a decade of breakneck growth.

The situation is dire in the capital, Nairobi, which is suffering from a huge over-supply of office units. The situation has been further compounded by a slowdown in economic growth and last year’s long electioneering process.

Real estate firm Cytonn, a victim of the glut, says Nairobi has a total supply of 32 million square feet of office space as at December 2017.

In the last ten years, Nairobi has been a huge construction site, literally. The city’s skyline has been turned into a massive scaffolding arena with heavy trucks fighting for space in congested city alleys to deliver construction materials.

Although signs of a looming oversupply of office space started to manifest at least five years ago, developers decided to bury their heads in the sand and kept on building.

The city is now faced more than five million square feet of unoccupied office space, according to property sector sources, but the number could be higher than quoted.

The Upperhill and Westlands areas of Nairobi, which have been the favoured sections of the city of developers, are the hardest hit by the glut. Skyscrapers which were completed three years ago are reported to have an occupancy rate of 50 per cent.

According to Cytonn Investments, Nairobi has a total supply of 31.8 million sq ft of office space while 3.5 million sq ft were delivered in 2017. The average occupancy level dropped in 2017 to 83.2 per cent from 88 per cent in 2016. Cytonn cited the protracted electioneering period, and a tough operating environment resulting from low credit supply as the main culprits.

The market is expected to face more uncertainty in the next three years once major projects like the Pinnacle, a 70-storey twin tower project, and the 40-storey Montave Tower are added to the market. -- NNN-KBC