Developers are shunning areas along Mombasa Road for other parts of the city due to persistent traffic jams along the highway, financial services group Britam Holdings said.
This is in the wake of growing investments in the real estate sector, mainly driven by increased supply of office space.
“The traffic continues to be very challenging where getting in and out is not easy so as a result, many new tenants who are coming on board including multinational companies are opting for other areas,” Britam CEO Kenneth Kaniu said yesterday.
He spoke during the launch of the firm’s Nairobi Office Market report for the second quarter.
“A lot of space along Mombasa Road also has grade B offices and people are demanding grade A space which for now is not on Mombasa road,” he added.
The situation has led to increased cases of loan defaults by developers and cessation of new development, the report shows.
This comes as projections for 2016 show the city will see the highest ever delivery of new offices with an estimated 3.8 million square feet, up from two million square feet delivered in 2015. Developers offered 1.7 million square feet in 2014.
Uptake of new offices in Nairobi increased from 1.30 million square feet in 2014 to 1.33 million square feet in 2015, the report states.
Upper Hill, Westlands, Ngong Road and Waiyaki are the most attractive areas for new office development.
Karen,Gigiri, Parklands, Riverside and Kilimani are classified as “rising phases” while the city’s Central Business District has remained slow with few office developments with ‘unsatisfied demand”.
Britam has attributed the increased office supply to anticipation of upcoming infrastructure developments in the country, the oil industry and Nairobi’s command as a regional hub.
“The high supply of office space is expected to peak in 2016 before bottoming out in 2017 and rising again in 2018 with Westlands and Upperhill leading in the supply,” Britam head of property Felix Maloba said.