Kenya’s prime office developers have seen their rental yields stagnate at 8.5 percent for the last three years despite rising occupancy levels, as an oversupply of lower-grade offices has kept rental prices flat.
Real estate firm Knight Frank says in its Africa Office Market Review for the first half of 2026 that the average rental price of a Grade A office in Nairobi stood at $13 (Sh1,684) per square metre in June, having remained unchanged since June 2022.
Rental yields have at the same time remained at 8.5 percent since June 2023, even though occupancy levels have steadily risen to 84.8 percent from the post-Covid-19 pandemic low of 71.5 percent three years ago.
Knight Frank says that the ability of the market to generate higher yields for developers has been hampered by continued oversupply of older office stock, which has forced landlords to compete for tenants on pricing terms, hence the flattening of rents in the recent past.
Meanwhile, developers of newer and more modern prime offices have been able to ask for higher rents, with the top-grade segment of the market remaining undersupplied.
The prime category refers to Grade A offices that are in key business locations, feature high-quality contemporary designs and are equipped with cutting-edge facilities.
In what has increasingly become a renter’s market, tenants are also taking into consideration green credentials such as energy efficiency, ventilation and lighting before occupying a property, with developers whose properties meet these requirements able to charge premium prices.
“The market is exhibiting a distinct two-tier separation, characterised by an undersupply of true Grade A offices alongside an oversupply of lower-grade offices. This has supported stronger occupancy levels and rental resilience in the Grade A office segment, while older office stock continues to face elevated vacancy rates and increased leasing competition,” said Knight Frank.
“Occupiers are also increasingly looking beyond traditional measures of office quality. Reliable backup power, adequate parking, modern specifications, professional property management, security and tenant amenities are emerging as decisive factors in leasing decisions.”
The yields on the Nairobi office market are comparable to the returns on offer in the government’s Treasury bills, which are paying between 8.7 and 9.1 percent, but lag those of longer-term bonds, which are returning between 11 and 13 percent.
The returns from commercial property have moderated in recent years, cooling off from the boom seen in the 2010s when demand was outstripping supply.
Nairobi’s status as a regional commercial and financial hub saw a steady increase in prime office space in the previous decade, as developers sought to satisfy demand from international investors, governments, diplomatic missions and multinational corporations.
Developers primarily targeted Upper Hill and Westlands for new developments, complementing the Nairobi Central Business District (CBD), where accessibility and availability of Grade A offices were limited.
Some of these properties that were put up during the period have now been surpassed in quality by newer developments, reducing their competitiveness in a market where demand growth has slowed down.
The market also shifted significantly due to the Covid-19 pandemic, which upended the commercial property market as many firms adopted remote working arrangements, with the subsequent economic shocks further eating into demand for space.
Other firms also moved to smaller, fitted-out office spaces as flexible working patterns became the new normal. This saw landlords grant concessions on lease renewals, which included lowering or freezing asking rental prices.
As a result of the stagnant rental prices and yields, Nairobi has now become one of the cheapest major African cities in the office market.
The Knight Frank analysis shows that Lagos and Cairo have the highest rental prices at $55 (Sh7,119) and $28 (Sh3,624) per square metre, respectively, with their annual rental yields standing at 10 percent.
Johannesburg has an average rental price of $19 (Sh2,459) per square metre and a yield of 9.5 percent, followed by Lusaka at a price of $18 (Sh2,329) and a yield of 11 percent.
In the East Africa region, the Kampala and Dar es Salaam office markets offer developers yields of nine per cent each, drawn from rental prices of $17 (Sh2,200) and $15 (Sh1,941) per square metre, respectively.
On the other hand, Harare offers the lowest yield among the surveyed cities at just six per cent, with its rental asking price also the lowest at $7 (Sh906) per square metre, as occupancy levels within the city’s central business district stand at 50 percent.
Gaborone in Botswana also lags Nairobi in yield at eight per cent and rent at $10 (Sh1,294) per square metre.
Similar to Nairobi, the other African cities have seen a clear demarcation in demand and prices between top-tier developments and older, lower-grade offices.
Across several markets, occupiers are shifting from congested CBDs to mixed-use and suburban nodes that offer accessibility, parking and integrated amenities.
“Across most markets that we track, occupiers continue to prioritise high-quality, ESG-conscious and operationally resilient office buildings, reinforcing the continent-wide ‘flight to quality’ trend,” said Knight Frank.
