Kenya’s prime office rents stagnate for fourth quarter despite rising demand, Knight Frank report shows

Prime office rents in Kenya have remained unchanged for four consecutive quarters up to June, despite rising demand—an unusual trend in a market where increased demand typically drives up prices.

According to Knight Frank’s latest office market dashboard report, rental rates have stabilised at around $13 (Sh1,700) per square metre per month. The report attributes this to differing demand dynamics between multinational corporations and local tenants.

The real estate consultancy firm explains that multinationals are increasingly prioritising sustainability, opting for green-certified Grade A buildings with advanced infrastructure and amenities that align with environmental, social, and governance (ESG) standards. This shift has maintained strong demand for premium office spaces, particularly in Nairobi’s key business districts.

In contrast, local businesses remain focused on affordability and functional workspaces, fuelling consistent demand for Grade B offices.

Lower-grade office stock

The report also highlights an oversupply of lower-grade office stock in the market, with about 15,000 square metres of new space expected by the end of the year.

“This has contributed to a prevailing ‘wait-and-see’ approach among developers, resulting in a slowdown in speculative construction activity,” the report reads.

“Consequently, prime office rents have held steady at $13 (Sh1,700) psm per month for four consecutive quarters, reflecting both supply side pressure and cautious demand side absorption.”

These dynamics mirror trends seen across Africa, where demand is increasingly concentrated on Grade A and ESG-compliant offices. This shift has widened the performance gap between prime and secondary office properties.

In more than half of the surveyed African cities, high-grade office occupancy rates in central business districts have surpassed 90 per cent in some key locations, signalling a robust ‘flight-to-quality’ trend.

Performance in East Africa is mixed but generally stable. Dar es Salaam, Tanzania, recorded a five-percentage-point increase in occupancy in the first half of 2025, rising from 70 per cent in H2 2024 to 75 per cent.

This indicates a modest improvement, even as speculative development remains limited.

Oversupply risk

Conversely, Nairobi and Kampala face the risk of oversupply.

Nairobi is projected to receive approximately 15,000 square metres of new space by the end of 2025, while Kampala is expected to add over 100,000 square metres of new Grade A stock within the same period.

In Southern Africa, office market dynamics are shifting as occupiers downsize and decentralise.

For example, in Lusaka, Zambia, leasing activity in Q1 2025 was driven largely by demand for smaller units (50–250 sqm) and serviced office solutions, reflecting a preference for flexibility and low upfront investment.

Slowdown in enquiries

However, Q2 saw a slowdown in enquiries and deal closures due to macroeconomic uncertainty and the re-entry of significant space into the market. This was largely a result of key institutional tenants withdrawing, influenced by changes in US foreign policy.

“USAID’s withdrawal, influenced by shifts in US foreign policy that reprioritised funding away from certain international programs, underscores the tangible impact of geopolitical decisions on Africa’s real estate landscape,” the report notes.

Across the continent, the report observes that hybrid work models are redefining occupier expectations.

“While flexible working strategies offer productivity and talent access advantages, challenges such as limited digital infrastructure and varying cultural readiness persist.”

Looking ahead, the long-term outlook for Africa’s office market will depend on the quality of assets, adaptability to occupier needs, and how well developments align with changing work habits and sustainability goals.