Nairobi registered a lower yield on prime office rents compared to its rival regional capitals, Kampala and Dar es Salaam, in the second half of 2025, new data shows, revealing the varied fortunes of investors.

An analysis of data by real estate firm Knight Frank on the office property segment reveals that the average yield on rent for a prime office in Nairobi stood at 8.5 percent in the second half of 2025, compared to 9 percent in both Kampala and Dar es Salaam.

The higher yields on rent in Kampala and Tanzania were in tandem with greater charges in the two capitals. Prime office owners in Kampala charged an average $16.50(Sh2,128.83) per square metre(sqm), Dar es Salaam$15(Sh1,935.30) and Kenya $13(Sh1,677.26).

The Knight Frank tracker showed that the Kenyan office market continued a run of stagnated growth through the second half of 2025, underpinned by steady absorption in the Grade A segment and a slow development pipeline.

“Prime Grade A office rents have remained broadly flat at approximately $13 per sqm per month, extending a two-year period of rental stability and reflecting an equilibrium between improving occupier demand and the effects of historic oversupply,” Mark Dunford, CEO of Knight Frank Kenya, said.

He said that market fundamentals strengthened over the review period, with prime Grade A occupancy increasing from 77.7percent to 80.3percent.

“This improvement is largely driven by strong tenant uptake in high-quality developments completed in late 2024, combined with the absence of significant new office completions in 2025,” Mr Dunford said.

Knight Frank said that despite rising office occupancy levels in Nairobi, leasing conditions remain favorable to tenants, adding that occupiers continue to exert pricing and structural leverage, with negotiations increasingly shaped by cost optimisation, building efficiency, and Environmental, Social, and Governance (ESG) credentials rather than headline rents alone.

Flexible and co-working space

“Sustainability has become a core decision driver, evidenced by landmark developments such as the US Embassy complex in Nairobi achieving LEED certification, reinforcing the growing preference among multinationals, diplomatic missions, and international organisations for environmentally certified buildings,” Mr Dunford said.

“In addition, the market has witnessed a continued expansion of flexible and co-working office space. IWG significantly expanded its footprint, delivering more than 2,000sqm of new flexible workspace across strategic locations, including Loresho, Crescent Parklands, and Mombasa Road”

Other operators also scaled up in the period, with Workstyle opening its third Nairobi location, following the partial conversion of the former Hilton Hotel into Tulivu Coworking, and Worknest launching a new flexible workspace in Runda.

“Collectively, these developments underscore a fundamental shift of demand away from long-term, conventional leases towards flexible, service-led, and cost-efficient workspace solutions,” Mr Dunford said.

“As a result, Kenya’s office market is increasingly characterised by flight-to-quality dynamics, greater alignment with ESG principles, and sustained demand for flexible spaces, even as overall conditions continue to favour tenants in the short term.”

An interior of a modern office.

Photo credit: Shutterstock

The tracker showed that Kampala’s office market remained favorable for tenants, with rental performance constrained by a widening supply–demand imbalance. Prime rents in Kapala have remained constant, averaging $16.50 per sqm per month for Grade A offices and $14.50 per sqm per month for Grade B space.

“The rental stagnation is driven by a significant expansion in Grade A office supply, with over 100,000 sqm of new space expected to be delivered by the end of 2025, outpacing current demand,” Judy Rugasira Kyanda, Managing Director of Knight Frank in Uganda, said.

Key developments in the pipeline in Uganda include Pension Towers (32,000 sqm), Saddler View Office Park (8,329 sqm), IGG Building (19,000 sqm), and JLOS House (60,040 sqm), among others.

“In response, landlords are increasingly offering tenant incentives, including fit-out contributions, extended rent-free periods, and flexible lease structures, to sustain occupancy. As a result, average occupancies remain high, currently estimated at 85percent for Grade A offices and 82.3percent for Grade B buildings,” Ms Kyanda said.

“Occupier preferences are also evolving. Suburban offices are gaining traction relative to the traditional CBD, driven by improved affordability, reduced congestion, and better accessibility. Additionally, there is a growing demand for condominium-style office units, particularly among SMEs,” she said.

The official said that demand for prime offices in Kampala is increasingly tilted towards smaller unit sizes, with limited appetite for large-format floorplates exceeding 1,000 sqm.

The tracker showed that the Tanzania office market continues to demonstrate resilient growth, supported by sustained tenant demand and rising occupancy levels.

“Current occupancy rates are estimated at approximately 80percent, up from 76percent in H1 2025, signalling a positive absorption trend in the short- to medium-term,” Ahaad Meskiri, Managing Director, Knight Frank Tanzania, said.

“Market demand remains concentrated within Grade A commercial nodes, particularly the CBD, Msasani Peninsula (Oyster Bay and Masaki), and select corridors near Mikocheni and New Bagamoyo Road (Morocco–Makumbusho),” he said.

Market yields in Dar es Salaam remain competitive at approximately 9percent per annum, positioning Tanzania among the highest-yielding office markets in the region.

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