Prime residential rents and sale prices in Nairobi declined in the first half of 2019 amid continued oversupply of high-end developments in some locations and a credit crunch that has affected money circulation and spending power.
“Knight Frank’s Kenya Market Update – 1st Half 2019,” released on Monday shows prime residential prices fell by 1.8percent over the period, increasing the annualised decline to 6.7 percent in the year to June.
Prime residential rents reduced by 1.7percent, taking the annualised decline to 3.3percent in the year to June.
“These factors have transformed the market in favour of buyers and tenants, which has been exacerbated by multinationals continuing to downsize whilst there are fewer expatriates relocating to Kenya, impacting negatively on the niche market,” the report notes.
In the retail market, rents for prime spaces in shopping malls decreased by 5.9% in the period to US$4.8 per square foot per month.
According to the report, landlords remained under considerable pressure to provide concessions to attract new tenants and retain existing occupiers.
The pressure was compounded by tough economic conditions that have left most consumers with less disposable incomes, directly impacting on retailers.
Occupancy levels in established malls remained high at 90 percent in the first half while new retail developments (completed in the last 18 months) recorded occupancy levels of between 45 percent and 55percent.
A trend was noted in the period where current and new tenants are opting to take up space within extensions in established malls to tap into the existing clientele rather than open shop in new retail centres, noted the report issued in Nairobi.
Overall, footfall increased over the six months due to the presence of fully operational anchor tenants in most shopping malls.
In the office market, prime rents in Nairobi remained unchanged in the first half of 2019 at US$1.3/sq ft/month, with the absorption of Grade A and B space declining by 8 percent compared to the second half of 2018.
The report states that some landlords are providing concessions such as longer fit-out periods, partial contributions towards tenant fit-outs or giving discounted rentals so as to retain existing tenants and attract new ones.
JK/abj/APA