The gleaming office towers that dominate Nairobi's skyline were once symbols of a booming economy and some of the most sought-after investments in Kenya's property market. Today, many tell a different story.
In Upper Hill, Westlands and parts of Kilimani, "To Let" signs have become a common sight. Entire office floors remain vacant months after completion. Landlords are offering rent discounts, rent-free periods and flexible lease terms to attract tenants, while some developers have quietly suspended new projects altogether. What was once considered one of the safest bets in real estate has become one of the sector's biggest challenges.
For years, developers raced to construct office blocks to meet the growing demand from multinational firms, financial institutions and technology companies. Demand appeared endless and investors poured billions of shillings into commercial office developments.
The market has since shifted dramatically. Today, Kenya is grappling with an oversupply of office space that has left landlords struggling to fill buildings, pushed down rental income and forced developers to rethink where they invest their money.
Kenya is grappling with an oversupply of office space that has left landlords struggling to fill buildings.
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According to the latest Knight Frank office market report, vacancy rates in many office sub-markets remain elevated, averaging between 15 and 20 per cent despite continued demand for premium green-certified office buildings.
Mark Dunford, Chief Executive Officer of Knight Frank Kenya, says the market has become highly selective. “A continent-wide flight to quality is driving tenant demand exclusively toward Grade A and ESG-compliant offices. This flight is leaving older, traditional Grade B and secondary buildings with rising vacancies,” he says.
The findings mirror broader trends observed across the commercial property sector. While high-quality modern offices continue attracting tenants, many older buildings are struggling to compete in an increasingly crowded market. Dunford’s observations are supported by data from the Kenya National Bureau of Statistics (KNBS), which indicates that office space continues to dominate commercial property listings but records relatively low uptake compared to other real estate segments. The result is a market where supply significantly exceeds demand in many locations.
When office space becomes abundant, landlords are often forced to compete aggressively for tenants. This competition usually begins with rent reductions. Real estate consultant, John Opondo, explains that many landlords have had little choice but to lower asking rents in order to maintain occupancy.
“When there are too many offices chasing too few tenants, rental rates inevitably come under pressure. Many landlords would rather accept lower rent than leave a building vacant for extended periods,” he notes.
Vacant offices create additional financial strain because landlords must continue paying maintenance costs, security expenses, service charges and loan repayments regardless of occupancy levels. In some cases, developers who financed projects through commercial loans are finding it increasingly difficult to meet debt obligations. This has also affected property valuations.
Buildings that were expected to appreciate in value have instead recorded slower growth, while some have changed hands at prices below initial expectations. The oversupply has also contributed to a slowdown in new office developments. This is because several projects have either been postponed, redesigned or converted into mixed-use developments as investors become more cautious about entering an already saturated market. The office oversupply challenge has been worsened by changes in workplace culture.
The Covid-19 pandemic accelerated the adoption of remote and hybrid working arrangements globally, and many organisations have retained these models. Instead of leasing entire floors or buildings, companies are increasingly seeking smaller, more flexible office spaces. Others have reduced their footprints altogether. As a result, traditional office demand has not recovered to the levels many developers had anticipated before the pandemic.
Rather than committing to long-term leases, businesses are prioritising flexibility. This shift has forced property owners to reconsider how their buildings can generate income. Investors are increasingly looking toward alternative real estate sectors that offer stronger yields. One of the biggest beneficiaries of this shift has been the hospitality sector. Official industry data shows that hospitality-linked business properties have achieved average rental yields of approximately 7.3 per cent, supported by occupancy levels exceeding 72 per cent.
These figures compare favourably with many traditional office investments. Instead of developing standalone office towers, some investors are converting underutilised spaces into serviced offices, co-working hubs, business centres and conference facilities. Others are exploring opportunities in the rapidly growing Meetings, Incentives, Conferences and Exhibitions (MICE) sector. The MICE industry has emerged as one of the most attractive alternatives for developers seeking higher returns. According to the Kenya Tourism Board, the sector is growing at more than 10 per cent annually and is increasingly becoming a significant contributor to the country's tourism earnings.
Mary Mutheu Muna, the Legal Counsel at Trianum Hospitality.
Photo credit: Pool
Mary Mutheu, Legal Counsel at Trianum Hospitality, says policy changes have played an important role in driving demand. Earlier this year, Kenya removed electronic travel authorisation requirements for citizens of all African countries. The move made travel easier and more affordable for business visitors across the continent. As a result, African arrivals have risen significantly and now account for a substantial share of international visitors entering the country.
“By lowering the friction of entry, the government effectively created year-round demand for sophisticated meeting and conference facilities,” says Mutheu.
Regional organisations, multinational corporations and development agencies are increasingly choosing Nairobi as a destination for conferences, summits and business meetings.
Why developers previously avoided MICE
Despite its current growth, conference and exhibition infrastructure was historically viewed as an unattractive investment. One reason was the dominance of the Kenyatta International Convention Centre (KICC), which many investors perceived as an insurmountable competitor. For decades, KICC served as East Africa's flagship conference venue, creating the perception that large-scale conferencing was primarily a government function.
Another challenge was the complexity involved in managing major events. Conference facilities require expertise in logistics, security, catering, technology and visitor management. Many traditional developers lacked the operational experience needed to run such facilities effectively. Regulatory requirements also discouraged investment. Obtaining planning approvals, environmental licences and operational permits for large conference venues was often viewed as a lengthy and expensive process.
Perhaps most importantly, traditional convention centres were designed as large, single-purpose facilities. While they could accommodate major events, they often remained underutilised for long periods. “For a private investor servicing commercial debt, an asset that generates no income for months at a time is difficult to justify,” says estate agent Joel Njogu.
Today's developers are approaching conference infrastructure differently. Rather than building massive standalone halls, many are embracing flexible, multi-purpose spaces capable of serving different markets simultaneously.
Samantha Muna, Managing Director at Trianum Hospitality, says successful MICE developments are designed around adaptability. Instead of constructing rigid exhibition centres, developers are creating hospitality-led hubs that can host conferences, corporate training sessions, product launches, weddings and social events. This flexibility ensures that facilities continue generating revenue throughout the year.
“A venue should not only serve conference delegates from Monday to Friday, it should also be able to attract social events, exhibitions and community activities during weekends,” says Muna.
Trianum Hospitality CEO Liza Uku and Managing Director Samantha Muna.
Photo credit: File | Nation
Developers are also integrating lifestyle amenities into conference-focused projects. Restaurants, coffee shops, fitness centres, wellness facilities and retail outlets help create vibrant destinations that attract both visitors and local residents. These amenities generate additional income while improving the overall attractiveness of the property.
Instead of relying entirely on office tenants, developers can spread risk across multiple revenue streams. However, experts caution that success in the MICE sector requires more than simply constructing a building. Liza Uku, CEO of Trianum Hospitality, says developers should involve experienced hospitality operators from the earliest stages of planning.
“Developers should work with hospitality experts from inception through construction and operations. This helps ensure that the final product is both operationally efficient and commercially viable,” says Uku.
Hospitality managers can advise on everything from kitchen layouts and service corridors to conference room configurations and guest movement patterns. These decisions have a significant impact on profitability and operational efficiency. Financing is another area where developers must adapt.
According to Collins Kigumo, a risk manager, traditional bank loans may not always be the best option for specialised hospitality projects. High borrowing costs can place significant pressure on cash flow during the early years of operation. Instead, developers are increasingly exploring joint ventures, long-term lease arrangements and management partnerships.
Under some models, investors partner with landowners who provide strategically located sites. Others enter into long-term agreements with hospitality operators who manage facilities on behalf of owners. These arrangements can reduce risk while improving financial sustainability.
Environmental sustainability is also becoming a critical factor in commercial real estate decisions. International corporations, development agencies and global organisations are increasingly required to meet Environmental, Social and Governance (ESG) standards. As a result, conference organisers are paying closer attention to the environmental credentials of potential venues. Properties that incorporate energy-efficient systems, water conservation measures and sustainable construction practices are becoming more attractive to high-value clients.
