Office space rents drop as flexible work from home becomes new normal
Occupancy levels in commercial office spaces remained low as absorption of new office space decreased by 47 per cent. In the wake of the pandemic, office buildings remained mostly vacant as employers introduced hybrid models of remote working.
Office space rent in Nairobi dropped by 13 per cent in 2020 as uptake of prime office rentals and rental value declined.
According to a Kenya Market Update research for the second half of 2020 by Knight Frank, prime commercial office rents in Nairobi decreased from US$1.3 per square foot per month to US$1.12 per square foot per month in the second half of 2020.
The report attributes the drop in rental value to various reasons among them a slowdown in market activity because of the lockdown imposed last year to curb the spread of the coronavirus.
“The decline in office uptake and rental values is mainly attributed to the continued oversupply of commercial space in some locations, the ongoing economic climate, and tightened restrictions implemented in the second quarter of 2020, which affected business operations and resulted in majority of occupiers halting their space requirements due to most of their staff working remotely.” The report says.
Occupancy levels in commercial office spaces remained low as absorption of new office space decreased by 47 per cent. In the wake of the pandemic, office buildings remained mostly vacant as employers introduced hybrid models of remote working.
The lockdown measures greatly impacted the ability of businesses to continue paying rent hence increased vacancies.
“Absorption of Grade A and B office space decreased by 50% in the review period compared to a similar period in 2019, with overall absorption for the year 2020 declining by 47%.” Says Knight Frank.
However, as the government lifted some of the stringent lockdown measures, absorption of Grade A and Grade B office space increased by 13 per cent in the second half of 2020 compared to the first half of 2020.
In the report, Knight Frank says the “trend is expected to continue in the first half of 2021 from both local and international tenants as the economy fully reopens, the Covid-19 vaccine is rolled out and the expected rebound of the Kenyan economy.”
Because of the economic downturn, landlords offered concessions and were open to negotiations to retain and attract new tenants.
