Nairobi’s ageing offices are losing tenants to greener rivals
By Juma Katana
The gap between Nairobi’s newest sustainable office towers and its aging commercial stock continues to widen. As multinational corporations and ambitious startups alike pursue Environmental, Social, and Governance (ESG) credentials, property owners across Kenya face an urgent question: retrofit or risk obsolescence?
Kenya has 89 green-certified buildings according to the Kenya Green Building Society, yet fewer than 10 percent of projects pursue green building certification despite incorporating sustainable features. The benefits of sustainability are recognized, but formal credentials remain underutilised.
The premium question
In Nairobi’s prime office districts, the flight to quality has become clear. Kenya’s prime office market achieved a 75 percent occupancy rate in the first half of 2024, representing a 3.5 percentage point increase. Yet this performance masks a deeper divide. Grade A buildings, particularly those with green credentials, command steady rents while their older counterparts struggle.
Mark Dunford, CEO of Knight Frank Kenya, notes that occupiers are willing to pay a premium for quality stock, with properties that incorporate strong ESG credentials best positioned to thrive. Buildings like Britam Tower, Vienna Court, and Riverside Cube maintain healthy occupancy levels precisely because they offer what today’s tenants demand: verifiable sustainability credentials alongside modern workplace amenities.
The premium for green buildings, however, varies dramatically across African markets. Research from Gauteng Province in South Africa challenges the straightforward narrative. In some office nodes, green and conventional buildings of similar quality were not differentiable based on rents and operating costs, though in other nodes, three-star rated green buildings commanded premium rents. Location, it appears, still trumps certification for many tenants.
The cost calculus
The financial barrier to retrofitting remains formidable. While specific data for Kenya remains scarce, property owners face substantial upfront investments. Britam Tower achieved 39 percent energy savings, 50 percent water savings, and 38 percent less embodied material energy through measures including external shading devices, insulation, and renewable energy systems. Such comprehensive upgrades require capital that many landlords find difficult to justify.
The split incentive problem compounds this challenge. When landlords invest in energy efficiency upgrades, tenants reap the operational savings through reduced utility bills. Business electricity rates in Kenya stand at KES 22.44 per kilowatt-hour, making energy costs a significant operational expense. Yet without mechanisms to capture these savings, property owners struggle to justify the investment.
Amrish Shah, an EDGE Expert and Auditor, addresses the core misconception. Many people still think going green means spending more, but that is a misconception, he explains, noting that cost benefits materialize when factors like insulation, daylight, water efficiency, and airflow are optimized at the design stage. For existing buildings, achieving comparable results requires more creativity and often higher costs.
The practical reality
What emerges from conversations with Kenyan building owners is a pragmatic approach to sustainability. Families are learning that saving energy is not about saving the planet but about saving money, notes architect Samuel Maliazo. This cost-driven sustainability finds expression in features like improved daylight optimization, better indoor air quality, and high material safety standards rather than formal certification.
The certification gap reflects rational economic calculation rather than environmental indifference. Registration and audit fees for green building certification represent one-time costs, but the perceived return on investment remains uncertain for many property owners. In Kenya’s price-sensitive commercial real estate market, where oversupply stands at 5.7 million square feet in the Nairobi Metropolitan Area, landlords hesitate to add certification costs to already challenged business models.
Regional patterns
Across Africa, the green building movement shows uneven progress. South Africa reports over 740 green certifications covering approximately 11.6 million square meters, representing 15 percent year-over-year growth. The focus on ESG compliance has led to notable increases in demand for green-certified buildings, particularly evident in South Africa, according to Knight Frank’s continental analysis.
Yet even in South Africa’s more mature market, the premium for green buildings remains inconsistent. The research suggests that while international studies point to rent premiums and cost savings for green buildings, African markets display more complex dynamics where node attractiveness and location can override sustainability credentials.
The viability gap
Kenya’s commercial office sector faces a fundamental viability challenge. Average asking rents increased by seven percent to KES 103 per square foot in 2024, driven by increased availability of high-quality Grade A spaces. This rental growth, however, may not sufficiently cover the costs of comprehensive sustainable retrofits for older buildings.
The construction economics remain unforgiving. New Grade A developments command premium rents precisely because they can incorporate sustainable features from inception, avoiding the complexity and cost penalties associated with retrofitting existing structures. For older buildings, the question becomes whether incremental improvements can bridge enough of the gap to remain competitive.
Looking forward
The commercial real estate market in Kenya is moving toward greater bifurcation. The increasing presence of multinational companies and the gradual return to working from office after the Covid-19 pandemic will continue driving demand for prime space. Buildings that can demonstrate clear ESG credentials through formal certification or substantive upgrades will capture this demand.
For property owners of older stock, the strategic choices narrow. Comprehensive retrofits that address energy efficiency, water conservation, and indoor environmental quality offer a path to competitiveness, but only if the numbers work. Alternatively, adaptive reuse strategies or targeting price-sensitive tenants willing to trade sustainability for affordability may preserve viability.
What appears increasingly untenable is the middle ground: buildings that are neither demonstrably sustainable nor sufficiently affordable to compete on price alone. As Kenya’s office market matures and tenant sophistication grows, this middle tier faces the starkest pressure.
The question for Kenya’s commercial property sector is no longer whether sustainability matters but rather which buildings can afford to prove it. In a market where formal green certification remains the exception rather than the rule, the coming years will reveal whether pragmatic, cost-driven sustainability can compete with certified excellence or whether the gap between old and new will simply continue to widen.
