Landlords have recorded a marginal drop in rental income collection from wealthy suburbs in Nairobi as expatriates flee the country after work dried up.
Occupancy levels for high-end rental apartments dropped by seven per cent in the last 18 months, attributed to reduced diplomatic missions into the country on security concerns and suspension of oil exploration activities.
A joint report by real estate developer Mentor Management Limited (MML) and Dyer and Blair investment bank showed occupancy levels dropped to 85 per cent across the Capital.
Hit hard
“This is a dip from last year’s occupancy levels which stood at 92 per cent which can be attributed to a drop in international arrivals and a general malaise in the oil industry as a result of lower oil prices and suspended drilling activities in northern Kenya,” said the report.
High-end residential units experienced reducing rental levels while relatively high vacancy of Grade B stock was recorded in estates housing the rich.
Westlands and Kilimani estates, which command the largest share of the up-market housing units, have been hit hard as most multinationals took tough administrative decisions including staff cuts over the period.
Upper Hill estate, the fastest growing offices hub, also felt the heat as occupancy levels for Grade B offices dropped.
The selling price of a high-end apartment in the areas ranges between Sh30 million and Sh50 million.
Average monthly rental rate is pegged between Sh110,000 and Sh230,000, with prime locations attracting even higher rents of Sh270,000 a month.
MML chief executive James Hoddell said the new trend has pushed back high-end properties onto the market that had previously been let long-term.
“New and high quality homes are still selling and letting at higher speed, but this slackening in the market sees Grade B, older and lower quality detached houses and villas now experiencing some vacancies,” he said.
Reduction of space
Nairobi has approximately 2,100 units of serviced apartments, growing from only about 1,000 units in 2003, according to the report.
While the city has also seen unprecedented levels of new building in retail and office space, shopping malls have begun to report some fall in foot traffic and sales.
“High levels of space hitting the market in 2016, combined with bearish retailer sentiment, will lead to reduction of space being delivered in 2017/2018,” said the report.
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