Gigiri, Karen and Westlands Register Best Rental Yield for 2018

By Vera Shawiza / April 8, 2019




Gigiri, Karen and Westlands were the best performing nodes in 2018 recording rental yields of 10.5, 9.2, and 9.0 percent attributed to increased demand by businesses and multinational companies due to their proximity to the CBD.

According to Cytonn Investment’s weekly report dubbed ‘Nairobi Metropolitan Area Commercial Office Report 2019’, other business nodes, high-quality office space and relatively good infrastructure network also contributed to good performance in the three areas.

Thika Road and Mombasa Road were the worst performing nodes recording rental yields of 6.7 percent and 5.8 percent respectively due to the lack of quality offices and the prevalence of traffic snarl-ups that have made them generally unattractive to firms.

In overall Nairobi Metropolitan Area Commercial Office market recorded a 0.2 percent points increase in rental yields to 8.1 percent in 2018, from 7.9 percent in 2017 driven by an improved macroeconomic environment and the positioning of Nairobi Metropolitan Area as a regional hub.

According to, the total office stock in Nairobi increased by 10.4 percent to 35.5 mn SQFT in 2018, from 31.5 mn SQFT in 2017, driven by completion of office complexes.

Office space supply has grown at a 23.6 percent CAGR between 2012 and 2018, driven by demand from growing SMEs and multinationals setting up operations in the country is the regional hub for East Africa.

Asking rents increased marginally by 1.6 percent to an average of 103 shillings per SQFT, from 101 shillings per SQFT in 2017, while asking prices increased by 0.6 percent to 12,719 shillings in 2018, from 12,649 shillings in 2017.

The slow rise in rents and prices is attributed to the oversupply of 5.2 mn SQFT office space as at 2018, which has created a bargaining chip for firms forcing developers to reduce or maintain prices and rents in order to remain competitive and attract occupants to their office spaces.

In terms of supply, Grade B offices were the most common, accounting for 58.1 percent of commercial offices in the Nairobi Metropolitan Area. The market witnessed an increase in Grade A office supply with offices such as FCB Mihrab (298,000 SQFT) and Prism towers (482,000 SQFT) coming into the market increasing the market share of Grade A offices from 24.0 percent to 25.0 percent of Cytonn’s sample size.

Gigiri had the highest percentage of its offices being Grade A at 66.7 percent. Nairobi CBD has the highest percentage of its offices being Grade B at 84.6 percent and no Grade A office space, while Mombasa Road has the highest percentage of its offices being Grade C at 50 percent.

With regard to performance, Grade B office spaces had the highest rental yields at 8.4 percent driven by 0.8 percent and 3.0 percent points increase in occupancy and rental rates, respectively.

Rental yields for Grades B and C increased by 0.5 percent and 0.9 percent points to average at 8.4 percent and 7.9 percent.

Grade A office yields however declined by 0.3 percent points from 8.4 percent to 8.1 percent due to a decline in occupancy rates, with new completions recording lower occupancy rates, and as they charge high rental rates, 12.5 percent above the market thus tenants opt for Grade B offices.



About Vera Shawiza

Vera Shawiza is Soko Directory’s in-house journalist. Her zealous nature ensures that sufficient and relevant content is generated for the Soko Directory website and sourcing information from clients is easy as smooth sailing.Vera can be reached at: (020) 528 0222 or Email: [email protected]

View other posts by Vera Shawiza


More Articles From This Author








Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2019
  • January 2019 (256)
  • February 2019 (216)
  • March 2019 (288)
  • April 2019 (167)
  • 2018
  • January 2018 (291)
  • February 2018 (220)
  • March 2018 (279)
  • April 2018 (226)
  • May 2018 (240)
  • June 2018 (178)
  • July 2018 (257)
  • August 2018 (250)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (286)
  • December 2018 (187)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (166)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (249)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (170)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950