Dollar Rents Drive Kenyans Out of Offices

The latest Kenya Market Update by Knight Frank has revealed that companies are increasingly avoiding office spaces in Nairobi due to landlords' preference for tenants to pay rent in dollars.

This has resulted in a 3.9% decline in office occupancy during the first half of 2023, bringing the occupancy rate down to 71.5%. The oversupply of office space in the Capital and the growing popularity of remote working among Kenyans are also contributing factors to this trend. Despite office rent prices remaining unchanged at Sh175 per square foot, landlords are insisting on rent payment in dollars as the Kenyan Shilling continues to decrease in value compared to the US dollar, exposing them to foreign exchange losses.

This primarily benefits those with dollar-based earnings while those earning in Kenyan shillings suffer from the depreciating shilling. Additionally, the introduction of 600,000 square feet of new high-standard office spaces in 2022 has worsened the oversupply issue in the city leading to a significant decline in office occupancy rates. The dollar-payment arrangement has led some companies to opt out of renewing their leases which has resulted in an increased number of vacant offices.

The decrease in office occupancy is also attributed to the pandemic which caused numerous enterprises to transition to remote working. Knight Frank discloses that real estate developers are experiencing difficulty in obtaining financial assistance because of the heightened cost of capital.