Asking rents for high-end residential properties in Nairobi rose by 1.1% in the year to September, according to the Knight Frank Prime Global Rental Index for the third quarter 2015.
The stable annual performance was largely due to higher growth in the latter part of 2014, which anchored Nairobi at the seventh position in the 17-city index for the second consecutive quarter. South Africa’s Cape Town, which is the only other African city in the index, was sixth with a 1.6% growth in the period.
However, Nairobi’s asking rents remained unchanged in the third quarter and during the preceding six months to September, projecting a flat growth for the 2015 calendar year.
Ben Woodhams, Knight Frank Kenya Managing Director, said: “The high-end rental market was relatively slow in the period due to a steady growth in supply that increased options for tenants. Nonetheless, we did not see a price movement downwards.”
With the widening options, luxury homes in gated compounds remained attractive for tenants compared to duplexes or apartments.
Looking ahead, no significant shifts are anticipated in asking rents for luxury residential in the city, as most tenancies will be renewed at the same levels as 2015. Even so, improvements will be seen in faster transactions as the market absorbs the current stock of rental units.
In addition, Nairobi’s top-end residential market is expected to be among beneficiaries of expansion drives by US companies eyeing the emerging markets over the next few years as they ride on relatively stronger economic prospects back home and the dollar’s performance. The prime residential rental market significantly relies on expatriates posted on short- to longer-term assignments.
“The strong US dollar, which is likely to be bolstered further as a result of the recent rate hike by the Federal Reserve, is driving US corporate relocations, particularly to emerging markets in Latin America and Africa. According to Mckinsey, by 2025 45% of the Fortune Global 500 companies will be based in emerging markets, compared to 5% at the turn of the century,” Kate Everett-Allen, Knight Frank Partner – Residential Research, notes in the report.
Globally, prime residential rents generally drifted lower, dragging the Prime Global Rental Index down by 0.9% to post its weakest annual performance in five years.
As a region, Africa (represented in the index by Cape Town and Nairobi) recorded the strongest growth in prime rents in the period, rising by 1.3%, and was the only world region to record positive growth.
China’s Guangzhou recorded the fastest growth in the period with a 6.2% increase in the year to September, 5.1% in the six months to September, and 3.5% between June and September.
To view the full set of city rankings, download the Knight Frank Prime Global Rental Index here.