Nairobi Developers Turn to Commercial Projects as Housing Demand Weakens
The value of approved commercial building projects in Nairobi rose sharply in the first quarter of 2026, even as approvals for residential developments declined, according to new data from the Kenya National Bureau of Statistics (KNBS).
KNBS figures show that approved non-residential building plans increased by 44.4 per cent to Sh21.37 billion between January and March 2026, up from Sh14.8 billion during the same period last year. Growth in warehouses, office buildings, retail centres and industrial facilities helped support construction activity despite weaker demand in the residential sector.
Residential building approvals fell by 10.3 percent to Sh41.06 billion during the quarter. Even so, total building plan approvals in Nairobi increased by 3.1 percent to Sh62.44 billion, reaching their highest level since early 2023.
The figures point to a shift in investment priorities within the property market. Commercial developments accounted for more than one-third of all approved projects during the quarter, compared with less than one-quarter a year earlier.
Their share is also nearly four times higher than the level recorded in 2023.
The trend reflects growing caution among private developers in the residential market.
Rising construction costs, expensive financing and concerns about household purchasing power have reduced interest in launching new housing projects.
At the same time, the government continues to expand its Affordable Housing Programme, which has become a major area of public spending since the introduction of the housing levy in 2023.
Speaking during the Budget Speech earlier this month, Treasury Cabinet Secretary John Mbadi said the programme is intended to address the country's housing shortage while supporting economic growth. He noted that housing projects are creating employment opportunities within the construction sector and related industries.
By May 2026, more than 277,000 housing units had either been completed or were under construction across the country. Demand has remained strong, with more than one million people registered on the Boma Yangu platform.
Government expenditure on housing almost tripled to Sh79.03 billion in the financial year ending June 2025, compared with Sh25.49 billion the previous year. The utilisation of allocated housing funds also improved significantly, reaching 96.3 percent.
The contrast between public and private investment strategies has become increasingly clear. While the government continues to expand housing development through public programmes, private developers are directing more capital towards commercial properties that generate rental and business income.