That Nairobi plays a dominant role as a regional hub is not in doubt. Over the last half century Kenya has established its role as a dominant regional player and Nairobi, continues to entrench its place in Africa .The reasons go beyond the traditional reasons of:
- Relative security and stability (as tested by recent terrorist incidents in the Country)
- A young and educated workforce
- Growing and stable economic performance
I give my thoughts and views as why we have the current situation of office oversupply in Nairobi:
Speculative Development: Over a decade or so, developers have increased the supply of commercial buildings speculatively and not particularly in response to “specific demand”. What this means is that we have stock that does not specifically address the demand in terms of quality and expectations.
Understanding the growth drivers (and in turn demand for commercial space):
In a recent publication, the World Bank identifies some of Kenya’s growth drivers as services and I quote, “Between 2006 & 2013, 72% of the increase in Kenya’s GDP came from services and mainly financial intermediation and mobile communication; partly owing to innovative solutions such as M-Pesa (mobile money) — stimulated demand for traditional services such as trade”. One must therefore consider, if these are the growth areas, how much of the office stock can these growth sectors absorb? And what type of stock do those engaged in these services require. For example, there are more than 40,000 M-Pesa retail agents (some of who also sell other products and services); how much space does Uber require for its offices? How much office space does the young entrepreneur who works off the internet to connect farmers to markets or inputs working off their smart phones require?
I contend, developers would best be advised to:
- Invest in professional best use studies ahead of developments. The global & local Corporates, that every developer desires to attract as tenants have very specific requirements and standards that such research can help you identify. It would also be useful to understand what percentage of the demand they constitute and the growth projections in these categories of Grade A tenants
- Seek to understand the requirements of the various users of office space and deliver to these specifications
However, in the short term, we must rethink the target for the existing stock. Addressing the fast growing service sectors and the illustrations above, we must review who and how we market the available stock. None of these users will be attracted or would require 3000 to 5000 sq ft. of space, yet we continue to see agents/brokers /developers advertise space on the basis of 1 occupier per floor/wing.
It is instructive that serviced office operator, who has introduced serviced offices that are “basic no frills” would set up and capture a market that more established existing operators cannot service. Coffee shops fill the gap – and surf office as the connecting agent/broker!