Report finds Nairobi's office rent among the cheapest in Africa

Nairobi is ranked among the cities with the lowest office rent rates in Africa according to a new report. This is despite other recent reports indicating an upward trend in the cost of office rents in the city. The survey by Knight Frank titled, ‘Africa Commercial Occupier Guide,’ published in the Knight Frank Africa Report 2015 shows the city still ranks below 16 other major cities in the continent with lower office rent.

The survey shows that in 2014, office rent in Nairobi averaged $21 (2,030) per square metre a month, while retail and industrial space rent averaged $48 (4,600) and $$4.20 (Sh403) per square metre per month respectively. Nairobi faired on well when compared to other cities such as Luanda in Angola, Lagos in Nigeria, Malabo in Equatorial Guinea, and Libreville in Gabon. Luanda’s rates average $150 (Sh4,800) per square metre per month for office space, $120 (Sh11,520) for retail and $21 (Sh2,016) for industrial property, is ranked as the most expensive in Africa for commercial and residential rents.

“Every real estate market operates differently in practice. However, lease terms and actual rents are key for multinationals considering moving into a given country,” said Knight Frank Kenya Managing Director Ben Woodhams. “Nairobi’s position as a regional hub ensures a steady demand for office space and the favourable terms available from landlords, combined with relatively low rents, ensure a good balance between demand and supply,” he added.

The report cited Kenya’s relatively longer leases as advantageous to landlords and tenants. The law allows commercial leases of a minimum of five years. Lease terms are typically three to five years in South Africa, two to five years in Nigeria and Uganda and one to three years in Tanzania according to the report.

development financing

The reports said the typical six-year agreement in Kenya allows predictability and planning. “Landlords can plan on servicing their development financing, while tenants can plan on investments with longer horizons, including recouping their fit-out costs that are usually a huge expense for new occupiers,” noted the report in part. Woodhams said the absence of sub-let clauses in typical commercial lease agreements in Kenya was also cited as a factor that would ensure that the landlord or property manager deals directly with the actual occupiers.

This is crucial in recent times in light of the country’s security situation where property owners and tenants are finding it increasingly important to know all building occupiers.

“Having all these terms spelt out legally, and being widely accepted in practice, has helped boost transparency in the property market. This works for both landlords and tenants, and the engagements are clear even in the event of unforeseen market disruptions,” said Woodhams.