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Rental Markets in Nairobi

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Nairobi has the highest rental yields in Kenya generating up to 10 and 12 times more when compared with other urban and rural areas. The rental market in Nairobi has been so lucrative that even indecent dwelling units, such as slums and squatter settlements, are attracting rent as much as Ksh2,500 for 10 by 10 single rooms.

The recent increase in rental costs in Nairobi has made the city one of the most lucrative property markets worldwide.

The rental market in Nairobi is driven by the growing housing deficits in Nairobi stimulated by increased rural-to-urban migration, major company headquarters, government ministries, industries and institutions are located here. So, what are the current market trends in Nairobi?

Availability of Rental Properties within Nairobi’s CBD

Finding suitable rental accommodation within the CBD is like finding a pearl, and once you find one, you have to part with substantial amounts of money to acquire it.

Rental properties here attract fees referred to as “goodwill” and can be as much as Ksh500,000 for 3 by 6 commercial spaces

The competitiveness of the properties here compels property owners to ask for quarterly or semiannual deposit fees instead of the usual 1 or 2 months rental deposits

  • If you are renting office/commercial space, be sure to take into account additional parking fees since properties in the CBD rarely have individual parking areas
  • Limited space within the CBD has prompted property owners to partition the available spaces into smaller commercial spaces popularly known as stalls, they can accommodate a greater number of people and businesses while attracting higher rental yields

Availability of Rental Properties outside Nairobi’s CBD

A growing favorite among property investors in Nairobi are properties outside the CBD in the suburbs. They are rapidly overtaking CBD-located properties in terms of rental yields. This is because they are not only cheaper to rent but also they are easily available and have more than adequate spaces for compounds and parking lots.

  • Majority of middle class prefer suburban properties
  • Property development along major highways such as Thika Superhighway and Mombasa Highway etc., are taking root in Nairobi due to their easy access to the city center
  • The interest in these properties by investors has pushed the rental rates to highs of 14.2% annually
  • The increased inflow of expatriates into Nairobi who aim to capitalize on emerging business opportunities across the East African region has contributed to the skyrocketing rents in Nairobi’s high-end properties
  • Mushrooming are cheaper but luxurious rental properties within high-end neighborhoods, this has resulted in more tenants from upper class moving in and replacing middle class, making these rental properties meant for middle class, costly for the latter to afford.

Tenancy

  • The major form of tenancy in Nairobi is periodic tenancy. Properties are leased periodically (every month or annually) until the tenancy is terminated.

Nairobi has:

  • Low-income tenants who live in indecent dwellings such as shanties (rented for as little as Ksh250 for sleeping spaces)
  • Lower, middle-income tenants spending Ksh40,000 for a 1 BR house
  • Upper middle and high income earners who can afford from Ksh50,000 – 300,000 for maisonettes

Rental Yields

In comparison to other world cities such as Hong Kong, Nairobi’s rental costs are cheaper. Nevertheless, the rental yield in Nairobi is on average 7%. Additionally:

  • Rental growth for high-end gated apartments are as high as 10 – 20% per year
  • Rental costs for high-end townhouses are between Ksh300,000 – 378,000 each month minus 16% VAT
  • Properties along highways such as along Thika Superhighway have recently attracted a 50% rise in rental costs

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Source by James E Harrison

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