Nairobi Clara Sanchiz CC BY-SA 2.0

The property boom in Nairobi: “This land is not for sale”

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Christian Hiller von Gaertringen
Business and finance journalist

The Ngong Road leading out of downtown Nairobi to the fashionable suburb of Karen has long been a beehive for small businesses. On the left-hand side of the road they sell plants in black plastic bags, on the right furniture dealers and ironmongers display their wares: wrought-iron gates, beds, cupboards.

In between all this a few sign painters have managed to find a space. One sign saying “This land is NOT for sale” is a big seller at the moment. The word “NOT” comes in all possible font sizes.

“Kenya is attractive to many international investors, because the yields are high and the legal framework is very secure,” reports Christine, a lawyer in one of the country´s foremost legal chambers. The legal system is based on that of the former colonial power, Great Britain. Investors can acquire plots on a 99-year lease. Transfer of plots is also secure, ever since the state has been issuing certificates documenting transfer of ownership and also requiring reports on, for example, whether there are any toxic residues in the ground.


Karen is one of the most sought-after residential areas in Kenya´s capital. Here, surrounded by a lush park landscape are large villas on even larger plots – a kind of Hampstead on the Equator. Karen is a favorite destination of property developers, whose prime aim when buying a villa plot is to build as densely as possible on that site – with three, four or even five villas.

In Nairobi city center there is just as much of a property boom – and one that has been going on for a good ten years. In recent years one office tower after another has shot up into the equatorial skies. Many international companies have set up offices here. The expanding Kenyan economy, which has been growing for years at around 5 percent p.a. and over, is attracting many companies from abroad.

Nairobi City Center

Nairobi City Center

The Munich-based electronics giant, Siemens, is working on the expansion of Kenya´s electricity network. Beiersdorf of Hamburg is successfully manufacturing its Nivea products in Kenya for the East African market. Even the Stuttgart-based sports car manufacturer Porsche has opened an office in Nairobi. And on the city´s supermarket shelves, consumers can find German wines.

A wealthy middle class is developing in Kenya.  And this is attracting consumer goods manufacturers from all over the world to the country. Also many American, British, South African and Australian exploration companies are flooding into Kenya, in the hope of finding oil, natural gas and other resources in the Great Rift Valley.

Greater affluence is also leading to increased demand for quality living space. The middle classes aspire to the apartment blocks that are being built everywhere in the city. The standard is every bit as good as in Europe. Higher earners move into residential areas with single-family houses, such as are being built in Lavington, but also increasingly on the edge of the city, for example in Thika. UN Habitat estimates that by 2025 the population of Nairobi will have almost doubled, from 3.2 million currently to 6.1 million.


High demand is making real estate projects economically attractive. In existing buildings, the yield on residential property is around 6 percent per year, according to a survey of the Kenyan market by real estate consultants Knight Frank. For offices and industrial property, it is at 8 percent and for retail space as much as 10 percent. The monthly rental for office space is around 8 US dollars per square meter and therefore at a level that is paid in many European cities.

However, for many investors in real estate in Kenya, these yields are still too low. Christine can count on the fingers of one hand the number of office buildings that have been refurbished in recent years. “The Equity Bank has renovated its building, then there was another one, and another…” she says. “The investors are interested more in new project development.” Because it promises a much higher return.


Projects to develop new property can easily achieve returns of 50 percent and more. Around Nairobi, for example, the new projects include ambitious commercial parks such as Konza City, Tatu City and Ken Gen’s Industrial Park, as well as residential projects such as Garden City in the prosperous northern ring around Kenya´s capital. To the west of Nairobi there are plans to build Machakos City (video), an entirely new town. But there is doubt as to whether it will ever get off the ground. “For years the people behind Machakos have just been talking and producing lavish brochures,” reports real estate investor Peter. “But so far nothing has actually happened.”

For a long time the majority of the real estate investors in Kenya came from the country itself. They developed projects in a more or less professional way. Now, increasingly, institutional investors from abroad are becoming interested in the Kenyan property market. Many of them come from South Africa. The initiator of the private equity fund Actis, for example, has also discovered property. Traditionally private equity has tended to focus more on companies that promise fast returns, but now Actis has also taken out a stake in the development of Garden City. Evidently the expectations of returns on property are just as high as on companies.

Other fund companies such as MMI Holdings have set up property funds investing in African projects, both retail as well as office and commercial property. The eight-year MMI Momentum Africa Real Estate Fund has a target volume of 250 million dollars. The internal rate of return (IRR) is reported to be around 18 to 20 percent. Initial investments in the development of an office park in Ghana and office buildings in the Ruandan capital of Kigali are close to finalization. Now the sector is looking to see what the fund managers will come up with in the Kenyan property market.


Many investors are evidently already casting an eye over the large expanse of space between the international airport and the city, an area that combines a promising location with excellent transport connections. Clearly it won´t be long before Nairobi and the airport have grown together. In a preemptive move, an institution of the Catholic Church has put up a large sign on their generously sized plot by the highway leading to the airport. It reads: “This land belongs to the Church. It is not for sale.”


More about the emerging real estate market in Sub-Saharan Africa will be discussed on Tuesday  from 14:00 to 18:18 in the Investment Locations Forum at EXPO REAL.

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