Nairobi lacks good offices, says new industry report

March 7, 2014 by admin

KENYA: With Nairobi being one of the most lucrative real estate destinations in the region, it is emerging that the industry is not capitalising on its potential. A new report by Mentor Management Limited has revealed that few developers are meeting the demand for office space in the city.

The report, released last week, revealed that many developers are not building offices that are in sync with what many companies are looking for.

“Developers are not responding to the rising demand for buildings with high quality and specifications and car park, especially for grade B space,” said Mentor Management Limited CEO James Hoddell. “Some of the buildings being constructed are unsuitable and therefore remain empty.”

According to the report, offices with parking space are the most preferred. “Grade A offices are mostly occupied because they have what the customers are looking for and that is the reason why they are in demand. The rent for Grade B offices is static with the lack of higher specifications and parking space being a major reason,” said Hoddell.

Developers are also said to have assumed the unavailability of parking space in the CBD, mainly preferred by people who do not drive. “There is an undersupply of parking space in the CBD and it is an opportunity for developers to come up with more parking silos,” said Mohamed Jivanjee, Mentor Management Development Manager.

Another area where demand might peak in the future if developers seize the opportunity is Thika Road, which has always been associated with residential developments and estates. With the completion of the superhighway and a bypass bisecting Kiambu County from the Nairobi-Nakuru highway, the area might become more lucrative once the Outering bypass is completed.

THIKA ROAD

“Thika Road is a possibility for office space once Outering Road to airport (JKIA) is completed as it will offer business executives the chance to reach the airport fast,” explained Raphael Mwito of Mentor Management.

The report, February 2014 Commercial Office Market, also explains the decline of interest in office space along Mombasa Road, with traffic said to have led to many unoccupied offices.

“The lower demand on Mombasa Road is a direct consequence of traffic congestion, which has led to high vacancies and depressed rentals,” said Hoddell, adding: “Currently, Mombasa Road is on the bottom phase of office supply nodes and the status will only change once the Southern bypass is completed by 2016.”

The Southern bypass, which will link Mombasa Road to the Nairobi-Nakuru highway at Kikuyu, is expected to ease congestion.

“It all comes down to the quality and specifics of a building and the traffic in the locality. That is what determines occupancy, rent and demand for office space in all the nodes in Nairobi,” said Hoddell.

Traffic is also expected to play a major factor in the demand for office space in Upper Hill, which is high at the moment. According to the report, office supply in Upper Hill is currently at 32 per cent, with the area expected to experience oversupply by 2016 due to the construction of newer buildings.

“If the traffic problem is not solved, accessibility will lead to stagnation at Upper Hill,” said Hoddell, on an area that has been in the media recently over stalled road projects.

Mentor Management did its research on the seven office zones in Nairobi: Upper Hill, Mombasa Road, Westlands and Parklands, Waiyaki Way, Kilimani/Karen, CBD and Gigiri. Gigiri is benefitting from the construction of new offices after the easing of zoning restrictions.

By MKALA MWAGHESHA

Source: Standard Media


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