Despite strong macroeconomic fundamentals and Kenya’s continued appeal as a regional business hub, Nairobi’s office market is navigating a significant vacancy crisis. The tension between supply growth, shifting tenant behaviour, and economic headwinds has created a landscape where traditional office demand struggles to keep pace with the rapid inflow of new space. This article breaks down the drivers behind this trend and what it means for Nairobi real estate, Kenya real estate investment, and commercial property investors.
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Office Market Overview: Supply vs Demand Imbalance
Commercial office space in the Nairobi Metropolitan Area (NMA) has expanded significantly over the past decade. According to Cytonn and Knight Frank data:
| Year | Total Office Stock (Mn SQFT) | Vacancy Rate (%) | Vacant Space (Mn SQFT) |
|---|---|---|---|
| 2022 | ~37.4 | 20.6 | ~7.7 |
| 2023 | ~37.1 | 19.7 | ~7.3 |
| 2024 | ~37.8 | 19.3 | ~7.3 |
| 2025F | ~37.2 | ~20.2 Estimate | ~7.5 |
The persistent oversupply of office space—estimated at more than 5.7 million square feet (SQFT) of vacant stock even as of 2024—has kept vacancy rates elevated. Supply is projected to edge higher in 2025 with new completions forecasted at about 0.2 million SQFT being added.
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The Main Drivers of Office Vacancy in Nairobi
1. Oversupply Outpacing Demand
Nairobi experienced years of aggressive office development, particularly in Upper Hill, Westlands, and Kilimani. While this created modern Grade A spaces, it meant the market absorbed more space than tenants were ready to lease, especially after the pandemic subdued demand.
Knight Frank reported that additional supply such as Purple Tower, Highway Heights, Matrix One, The Mandrake, and Museum Hill Towers added roughly 522,000 SQFT of space in recent market cycles, further contributing to an overhang.
2. Remote and Hybrid Work Models
One lasting legacy of the COVID-19 pandemic is the shift in how organisations use office space. Many companies increasingly adopt hybrid work arrangements, reducing the need for traditional large floor plates and permanent space. Surveys and market reports have indicated that remote and hybrid work patterns remain major determinants of slowed office uptake.
3. Economic and Financing Pressures
High borrowing costs and tighter credit conditions have discouraged developers from committing to new commercial projects. As a result, many planned developments have been delayed or canceled, contributing to a cautious climate among investors. High non-performing loans in the real estate sector also tighten the ability of developers to build or refurbish properties.
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Rising Occupancy but Still a Tenant’s Market
There are nuanced trends underneath the surface:
- Prime Grade A office occupancy rose to about 77.7% by mid-2025, indicating solid demand for high-quality space.
- However, older or lower-spec (Grade B and C) offices continue to struggle with vacancy. Secondary spaces often fail to attract tenants seeking modern amenities.
- Overall occupancy has fluctuated, with reports showing declines followed by partial recovery—e.g., occupancy dipped to about 72.7% in H2 2024 before climbing again.
This pattern underscores a “flight to quality” trend—where tenants prioritise well-located, modern, and flexible workspace, leaving older or less adaptable buildings at a disadvantage.
Rent Dynamics and Market Reaction
Rental rates in Nairobi’s office sector have remained relatively stable even amid vacancy issues. For example, prime office rents hovered around USD 1.20 (≈ KSh 155) per square metre, signalling that landlords are wary of raising prices in a tenant-favouring environment.
Developers and landlords are responding by:
- Introducing lease incentives such as rent holidays or flexible terms.
- Upgrading buildings with modern amenities and ESG certifications to appeal to quality tenants.
Location Performance and Investment Outlook
Some sub-markets within Nairobi provide relatively better performance:
| Sub-Market | Approx. Rental Yield | Notes |
|---|---|---|
| Westlands | ~8.5% | Top-performing node with strong tenant demand |
| Gigiri | ~8.2% | High demand for embassy and diplomatic leases |
| Karen | ~8.0% | Premium office & mixed-use appeal |
These pockets suggest that while a broad vacancy trend persists, well-located and higher quality assets still attract investors and tenants, a key insight for Kenya real estate investment strategies.
What’s Next for Nairobi’s Office Market
1. Continued Oversupply Pressure
Vacancy is likely to remain elevated in the near term as new office stock continues to be delivered faster than demand grows.
2. Adaptation to Hybrid Models
Landlords who reposition spaces for flexibility—such as co-working, short-term leases, and flexible floor plate designs—will likely outperform traditional office formats.
3. Focus on Quality and ESG
Demand remains weighted toward modern, energy-efficient buildings with amenities that support hybrid work and health standards.
A Vacancy Crisis Rooted in Structural Change
Nairobi’s office vacancy challenge is not a short-term blip but a structural shift. A combination of oversupply, remote/hybrid work trends, and economic constraints has softened traditional office demand—resulting in a market where new space struggles to find tenants, even as prime assets remain attractive.
This evolving dynamic marks a critical inflection point for Nairobi real estate, urging investors to focus on location quality, flexibility, and tenant-centric solutions as they navigate a market reshaped by post-pandemic realities.
