A network of new roads in Nairobi’s Westlands area is stealing the thunder from Upper Hill as the location of choice for companies seeking upmarket offices away from the congested central business district (CBD).
Developers’ scramble for land in Westlands saw the cost of an acre increase 1.5 percent in the last three months of last year, according to the HassConsult land price index for 2018.
But at about Sh417.5 million an acre, it remained relatively cheaper than Upper Hill.
Prices of land in Upper Hill, on the other hand, dropped by 1.2 percent in the same period, but remains one of the most expensive addresses in the city at about Sh551.8 million per acre.
The HassConsult report released last week says commercial office developers are getting increasingly attracted by new infrastructure development in the Westlands area at the expense of Upper Hill.
“Westlands is going through some sort of urban regeneration, hence we have seen a lot of interest in that area especially with the new infrastructure development and entertainment services going on,” says the HassConsult report.
Access to Westlands is improving with new road works, such as the ongoing development of Waiyaki Way, the Waiyaki Way-Redhill link road and Ring Road-Parklands (Waiyaki Way to Limuru Road) connection.
Prime office space is also letting at a higher rate per square foot in Westlands compared to Upper Hill, according to real estate management firm Knight Frank.
Given that land is cheaper in Westlands, a developer stands to earn more for a building in the area than in Upper Hill.
Knight Frank says the average rent for Grade A office space in Westlands, which is the most prime location in Nairobi, is $1.4 (Sh141) a square foot per month, while Upper Hill is fetching $1 (Sh101) per square foot exclusive of service charge and VAT.
The office market is also becoming saturated in Upper Hill after years of intense office space development in the area, the HassConsult survey states.
The pace of development of support infrastructure such as roads, water and sewerage in Upper Hill has lagged the growth in office buildings, straining the existing facilities.
“Upper Hill has seen a lot of commercial building lately, which has resulted in oversupply of space, meaning that anyone who is looking to develop office space in the area is seeing some difficulty doing that.
“When there is less demand to put up space there, then the price of land will take a slight hit,” said Sakina Hassanali, the HassConsult head of development, consulting and research.
The Gigiri area has also seen rising demand for prime space, jerking up the price of land by 3.4 percent in the fourth quarter of 2018, and 10.6 per cent for the whole of last year, to Sh249.6 million per acre.
The area is popular with diplomatic missions and international organisations.
It has also benefitted from construction of improved road connections and other amenities such as shopping malls.