Westlands was able to attract more office and real estate investors than other regions in the Nairobi Metropolitan Area(NMA) in 2023 thus raising its rental yields.
Its practical position, good road network and attractive business atmosphere largely contributed to the positive results
According to the Cytonn Investment 2024 Commercial Office report, the average rental yields were 8.5 per cent which is 0.8 per cent higher than the average market which is 7.7 per cent.
The report, which analyses the performance of the commercial office sector in NMA by tracking the changes in occupancies, rental yields and rental rates, provides a greater outlook on the real estate market for investors.
Gigiri followed closely as the second-best, achieving an average rental yield of 8.2 per cent while Karen secured the third position with an average rental yield of 8.0 per cent.
The housing sector's improved performance can be attributed to various factors such as the gradual resurgence of demand for physical spaces as more firms resumed full operations post-COVID-19.
In addition, increased accessibility of Grade A office spaces such as the piano, the cube and Karen Green has further raised the attractiveness of the high-performing areas.
The prominence of multinational corporations, international organizations, and embassies in these areas further drove up the demand for quality offices in the region.
On the contrary, Mombasa Road emerged as the least-performing node in 2023, recording an average rental yield of 5.7 per cent, which was 2.0 points lower than the market average of 7.7 per cent.
“The prevalence of lower quality office buildings in this area resulted in lower average rental rates, averaging at Sh 72 per square feet,” the report said.
Notably, Mombasa Road is widely viewed as an industrial zone hence it had less appeal to office-based businesses seeking commercial space.
"Other areas in the top ten were Parklands, Kilimani, Karen, Nairobi CBD, Upperhill and Thika Road," the report said.
Consequently, Grade A and B office areas achieved high rental yields of 7.8 per cent with Grade B showing a 0.6 per cent increase in occupancy rates.
This rise in occupancy rates was mainly due to their comparatively affordable rental rates compared to Grade A offices, which experienced a 2.5 per cent decrease in occupancy rates.
Additionally, Grade B offices offer superior technical services compared to Grade C spaces.
However, Grade C office spaces demonstrated the most significant improvement in occupancy rates, increasing by 3.8 per cent in 2023.
Grade C offices experienced the most significant rise in rental yield, increasing by 0.4 per cent.
This notable improvement can be credited to a substantial increase in occupancy rates, which surged by 3.8 per cent from 73.2 per cent in 2022 to 77.0 per cent in 2023 due to their affordability.