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 indecent housing such as slums and squatter settlements attract rents of up to KS2,500 for single 10 x 10 rooms.

The recent rise 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 go as high as Ksh500,000 for 3-by-6 commercial spaces

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

  • If you are renting office/retail space, be sure to account for 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, which can accommodate larger numbers of people and businesses while attracting higher rental returns.

Availability of rental properties outside the Nairobi CBD

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

  • Most of the middle class prefer suburban property

  • Real estate development along major highways like Thika Superhighway and Mombasa Highway etc. is taking root in Nairobi due to its easy access to the city center.

  • Investor interest in these properties has pushed rents to maximums of 14.2% per year

  • The increased influx of expatriates to Nairobi seeking to capitalize on emerging business opportunities in the East African region has contributed to skyrocketing rents in Nairobi luxury properties.

  • The proliferation of cheaper but 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. are expensive for the latter.

Tenure

  • The main form of tenancy in Nairobi is periodic tenancy. The properties are rented periodically (every month or annually) until the end of the lease.

Nairobi has:

  • Low-income tenants living in indecent shanty-like housing (rented for as little as Ksh250 for sleeping spaces)

  • Low-middle income renters spending Ksh40,000 on a 1-bedroom house

  • Upper middle and upper middle income people who can afford between Ksh 50,000 and Ksh 300,000 per duplex

rental yields

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

  • High-end apartment rental growth is 10-20% 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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