This archive report was first published on 5 July 2021.
As the Covid-19 pandemic continues to affect economies across Africa, the property market has taken a significant hit. According to Knight Frank's inaugural Africa Office Market Dashboard for Q1 2021, prime office rents declined by 11 percent while residential rents declined by 19 percent on average in the year to December 2020 in most prominent African cities.
Dar es Salaam and Tunis recorded the highest declines in prime residential rents, with drops of 33 percent and 34 percent respectively on average in 2020 compared with 2019. In Nairobi, prime office and residential rental yields declined by 3.9 percent in 2020.
Experts anticipate that the office market will remain subdued over the course of 2021, with earlier signs of recovery only expected in the last quarter of the year. However, occupier activity in major hotspots such as Nairobi might increase, according to Tilda Mwai, Knight Frank Researcher for Africa.
Unique conditions affected rental yields in the different cities. In Dar es Salaam and Nairobi, lockdown restrictions imposed towards the end of Q1 impacted negatively on flights by expatriates, market activity, and thus on consumer spending power.
Remote work dynamics, currency fluctuations, and a supply glut in Johannesburg and Cape Town were some of the issues affecting rental yields in southern Africa. The low rental yields have been attributed to a decline in household disposable incomes, resulting in an oversupply of office space.
There remains an oversupply of commercial space in most districts across the city, which together with the slowly recovering economy and working from home dynamic has given occupiers the upper hand in lease term negotiations and forced landlords/developers to be more flexible, according to Anthony Havelock, Knight Frank Kenya Head of Agency.
However, Kampala is expected to record a rise in occupier activity due to the recent signing of the East African crude oil pipeline project, which could drive up demand from the oil and gas sectors.
