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Kenya

Parklands has the highest return on office rental yields, Mombasa Rd lowest

The office property market had an average yield of 9.2 percent in 2016/MITULA

NAIROBI, Kenya, Apr 24 – The Parklands area has the highest return on rental yields due to its strategic location and quick access to Nairobi CBD.

Mombasa Road had the lowest average rental yields as a result of traffic congestion and the zoning regulations for industrial use in the area.

According to Commercial Office Report by Cytonn Investments, Parklands premium rents realized an average rental yield of 10 percent yields while Mombasa Road stood at 8.5 percent.

Parklands and Gigiri have also benefited from the relaxation of zoning regulations paving way for development of office spaces in a previously residential zone.

Cytonn’s Real Estate Services Manager Johnson Denge says that on average, the office property market had an average yield of 9.2 percent in 2016.

“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,” Denge said., “relaxation of zoning regulations is also paving way for development of office spaces in previously residential zones such as Parklands and Gigiri.”

In terms of grades, the report says that grade B offices have the highest supply with a 60 percent market share while the top-end grade A offices accounted for only 10 percent.

However, in terms of performance, grade A offices had the highest yields with Grade B offices having the highest occupancy levels at 90.6 percent.

Meanwhile, the report suggests a market performance stagnation, constrained by the oversupply, slow-down in growth of financial services and SME sectors as well as the upcoming election which will slow down demand.

Reduced development activity is expected as the market reacts to the stagnating prices and returns.

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“For 2017 we also expect the prices to remain stable,” he said.

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