Firms pay more to relocate from CBD, says report

By LILLIAN KIARIE

Traffic congestion and limited parking spaces are forcing Kenyan firms to pay exorbitant rent charges to relocate to better premises outside Nairobi’s central business district, a new report shows.

The report by Mentor Management, a real estate firm, reveals that offices offering parking spaces and decongested areas with minimal traffic are emerging as first choice for most commercial tenants.

This makes offices along Mombasa Road and the CBD to be the least favoured areas by tenants.

Waiyaki Way and Westlands are said to be attracting the highest rental rates in the market, with most sought-after offices costing about Sh165 per square foot while an average office space in the same area is costing about Sh120 per square foot.

“Rents are still rising for the high-end and most sought after office space (Grade A) whilst it is static for Grade B offices,” said James Hoddell, the Chief Executive Officer of Mentor Management.

The report reveals the average asking rents for a square foot of Grade A office space in Gigiri is Sh140, Upperhill Sh120, Kilimani Sh100 while on Mombasa Road and the CBD it is about Sh74.

Hoddel projected that Westlands will experience shortages of office spaces in the coming years while Upperhill is expected to experience a looming oversupply due to the constant construction of office space.

“Shortages of space are currently most acute along Waiyaki Way and Westlands. Based on current planning permissions and buildings under way, these shortages are set to get worse during 2014 and 2015,” Mentor Management reports.

According to Justus Kirigua, a property owner along Westlands, renting an average office space in Westlands, for instance at Delta Building, attracts Sh103 per square foot.

The February 2014 Commercial Office Market report projected that there is a risk of general oversupply across the city by 2016.

Mombasa Road was noted to be currently oversupplied and suffering from high vacancy rates, with asking rents for Grade A at Sh75 per square foot and Grade B offices at around Sh62 per square foot.

“The lower demand on Mombasa Road is a direct consequence of traffic congestion which has led to high vacancies and depressed rentals,” Hoddel added.

The survey by Mentor Management also reveals that although office buildings on Mombasa Road are located on a major channel close to the airport and main Industrial Area, they continue to attract lower demand due to the traffic congestion, which has depressed rental levels.

“We predict that the opening of the Southern Bypass linking Mombasa Road to Kikuyu will offer a way around the city through traffic and lead to improved take up for Mombasa Road offices in the next three to four years,” Hoddell said.

Thika Road and Gigiri were noted to have high growth potential as most middle and high income earners are relocating to this areas that have reduced traffic congestion courtesy of the newly constructed highway.

“Infrastructure is critical to occupier decision making and thus on the relative movement of rents in different nodes,”said Mohammed Jivanjee, the Development Manager.