Property glut hits city rents across Africa

Monday July 05 2021

An aerial view of a section of Nairobi city. FILE PHOTO | NATION MEDIA GROUP

By Albert Mwazighe

Prime office rents declined by 11 percent while residential rents declined by 19 percent on average in the year to December 2020 in most prominent African cities due to the current economic downturn occasioned by the Covid-19 pandemic.

Knight Frank’s inaugural Africa Office Market Dashboard for Q1 2021, tracking the performance of rental rates in African cities, also shows that Dar es Salaam and Tunis recorded the highest declines in prime residential rents, recording drops of 33 percent and 34 percent respectively on average in 2020 compared with 2019.

Prime office and residential rental yields in Nairobi declined by 3.9 percent in 2020.

“In general, we anticipate that the office market will remain subdued over the course of 2021 with earlier signs of recovery only expected in the last quarter of the year. However, we expect that occupier activity in major hotspots such as Nairobi might increase,” said Tilda Mwai, Knight Frank Researcher for Africa.

Unique conditions affected rental yields in the different cities. In Dar es Salaam and Nairobi for instance, the lockdown restrictions imposed towards the end of Q1 impacted negatively on flights by expatriates, market activity and thus on consumer spending power.

Remote work dynamic


In southern Africa, currency fluctuations, the political climate in Lusaka and a supply glut in Johannesburg and Cape Town were some of the issues affecting rental yields.

In general, however, the low rental yields has been attributed to a decline in household disposable incomes, resulting in an oversupply of office space. In Nairobi for instance, there was an estimated 3.9 million square feet oversupply of office space in 2020.

“There remains an oversupply of commercial space in most districts across the city which together with the slowly recovering economy and working from home dynamic has given occupiers the upper hand in lease term negotiations and forced landlords/developers to be more flexible,” said Knight Frank Kenya Head of Agency, Anthony Havelock.

Kampala, however, is expected to record a rise in occupier activity due to the recent signing of the East African crude oil pipeline project which could drive up demand from the oil and gas sectors.