Landlords to Cut Rents for State Offices Under New Rules

A major shake-up of the rental sector in Kenya is looming following the government’s latest plan to limit the amount that a landlord can demand for leasing a house or office to the State.

Treasury Secretary Henry Rotich says the government is negotiating afresh the cost of leasing property to cut its rental expenses in a move that will hurt landlords profiting from inflated charges.

“The government has been leasing office space at higher market rates resulting in huge costs,” Mr Rotich said in a statement on Thursday.

“Beginning July 1, 2019, all procurement of office accommodation by the government will be standardised with uniform cost leases and existing contracts will be renegotiated to ensure a standard rate,” he added.

This means affected landlords will either cut their rents or part ways with their high-profile tenants.

According to the Treasury, rental expenses for buildings leased by the government rose to Sh5.9 billion in the year ended June 30, 2018, up from Sh5.4 billion a year earlier – a trend the government is now seeking to reverse.

RELATED: Mall Tenants Now Play Hardball in Lease Talks

The new directive comes at a time when landlords are increasingly facing tough demands from tenants, including that of rental amount reductions and waiver of deposits.

In Embakasi, for example, a landlord was recently prevailed upon by tenants to cut rents from Sh12,000 to Sh9,000 on protestation that his houses are too cold at night, and dark during the day.

And in South C, a tenant’s Whatsapp group is deliberating on plans to demand a 5 per cent rent discount “in line with the recent drop in rental costs in Nairobi’s upmarket estates.”

According to HassConsult, rents in the capital’s high-end detached houses fell four per cent in the first 12 weeks of this year on falling demand from expatriates, who are increasingly ditching stand-alone houses for serviced apartments.

Shopping mall owners are equally feeling the heat of the changing market dynamics. The throng of new malls across the country has resulted in a supply glut that is now piling enormous pressure on landlords to cut rental prices to retain or lure new tenants.

Growing competition, increased supply, and shrinking demand are emboldening tenants to flex their muscles in lease negotiations as landlords fight to keep spaces occupied.

Join 15,000+ pros getting our weekly digest of news and insights.