In a Commercial Office Report released by Cytonn Investments, the two areas yielded rental rates of 10.0 and 9.7 per cent respectively thanks to their prime locations enabling them to charge premium rates and attract quality tenants.
Parklands and Karen emerge as the most attractive locations for office spaces
The two areas yielded the best rental rates thanks to their prime locations.
Mombasa road and Thika road were on the other hand ranked as the worst performing markets with average rental yields of about 8.5 per cent respectively.
This is mainly attributed to traffic congestion and zonal regulations for industrial use on Mombasa road with Thika road zoned for lower-mid income residential with low-quality office space.
The report further noted that Upperhill, Westlands, Kilimani and CBD remain to be the top business places in Nairobi.
Upperhill and CBD take the lion’s share in highest supply of office space with market shares of 24.4 per cent and 24.3 per cent respectively.
“It is a good time to invest in the commercial office space for long term gains when the market picks in 3-4 years. Investments should be geared towards zones with low supply, high returns and differentiated concepts,” noted Cytonn’s Real Estate service manager Johnson Ndege.
In terms of grades/class, grade B offices have the highest supply with a 60 per cent market share with grade A offices accounting for only 10 per cent.
However, in terms of performance, grade A offices had the highest rents with yields of 10 per cent, while grade B offices enjoyed 90.6 per cent occupancy levels.
The report expects reduced development activity with the market currently over-supplied constraining performance which is now a buyers’ market. The upcoming general elections is also expected to slow down demand.
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