Rental markets in Nairobi

Nairobi has the highest rental yields in Kenya generating up to 10-12 times more compared to other urban and rural areas. The rental market in Nairobi has been so lucrative that even squalid housing such as slums and squatter settlements attract rents of up to 2,500 Kenyan shillings for individual 10 x 10 rooms.

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

The rental market in Nairobi is driven by the growing housing deficit in Nairobi spurred by increased migration from rural to urban areas, here are the headquarters of major companies, government ministries, industries and institutions. So what are the current market trends in Nairobi?

Availability of rental properties within the Nairobi CBD

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

Rental properties here attract so-called ‘goodwill’ fees and can reach Ksh500,000 for 3 by 6 commercial spaces

The competitiveness of properties here forces owners to ask for quarterly or semi-annual deposit fees instead of the usual 1 or 2 month rental deposits.

• If you are renting office/commercial space, be sure to factor in additional parking fees, as properties in the CBD rarely have individual parking areas.
• Limited space within the CBD has led landlords to divide available spaces into smaller commercial spaces, popularly known as stalls, that can accommodate a larger number of people and businesses while attracting higher rental yields.

Availability of rental properties outside Nairobi CBD

A growing favorite among real estate investors in Nairobi are properties outside the CBD in the suburbs. They are rapidly outperforming properties located in the CBD in terms of rental performance. This is because they are not only cheaper to rent, but also readily available and have more than adequate spaces for enclosures and parking lots.

• Most of the middle class prefer suburban properties
• Real estate development along major highways such as Thika Superhighway and Mombasa Highway etc. is taking root in Nairobi due to its easy access to the city center.
• The interest in these properties by investors has pushed rents to a maximum of 14.2% per year
• The increased influx of expats to Nairobi looking to capitalize on emerging business opportunities in the East African region has contributed to skyrocketing rentals in Nairobi luxury properties.
• The proliferation of cheaper yet luxurious rental properties within high-end neighborhoods has resulted in more upper-class renters moving in and replacing the middle class, making these rental properties aimed at the middle class be expensive for the latter.

Tenure

• The main form of leasing in Nairobi is the periodic lease. The properties are rented periodically (every month or yearly) until the lease ends.

Nairobi has:

• Low-income tenants living in indecent housing such as shacks (rented for as little as Ksh250 for sleeping spaces)
• Low and middle income renters spending Ksh40,000 on a 1-bedroom house
• Upper middle and upper income people who can pay between 50,000 and 300,000 Ksh for duplex

rental income

Compared to other world cities like Hong Kong, Nairobi rental costs are cheaper. However, the rental yield in Nairobi is on average 7%. Also:

• Rent growth for high-end apartments is between 10% and 20% per year
• High end townhouse rental costs range from Ksh300,000 – 378,000 each month minus 16% VAT
• Properties along highways like the Thika Superhighway have recently attracted a 50% increase in rental costs

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