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Nairobi battles oversupply of retail space

27 February 2014, 15:41

Nairobi - There is an oversupply of office space in some market locations in Nairobi, a development which could worsen and evolve into a general oversupply across the city by 2016.

This is according to a report by Mentor Management Ltd, a development and project manager, which announced of the oversupply in a report based on physical site inspections, market intelligence, and Nairobi City Council planning data.

The report outlines the current status and outlook for the city’s seven office “nodes.”

Among these are Mombasa Road, Kilimani/Karen, Upper Hill, CBD, Waiyaki Way, Westlands, Parklands and Gigiri.

It also analyses the potential for the Thika Road to emerge as an eighth office node.

“The lower demand on Mombasa Road is a direct consequence of traffic congestion, which has led to high vacancies and depressed rentals,” said James Hoddell, Chief Executive Officer of Mentor Management Limited.

Only one of the nodes- Mombasa Road- is currently oversupplied and suffering from high vacancy rates, where asking rents for Grade A offices are currently running at Sh75 per sq ft, and Grade B offices at around Sh62 per sq ft.

However, the report predicts that the opening of the Southern Bypass, which will link Mombasa Road to Kikuyu, offering a way around the city for through traffic, will in the next three to five years lead to improved uptake for Mombasa Road offices.

The other imminent source of office oversupply is set to be Upper Hill, where occupancy of Grade A offices has until now been exceptionally high at 95 per cent.

“However a sharp supply increase, with an additional 2.28 million square feet of office space coming into Upper Hill over the next two years, is now set to lead to some oversupply and real competition for tenants,” said Hoddell.

– CAJ News

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