Investors in Kenya’s property market are shifting away from speculative mega malls and traditional office developments, according to the latest report by commercial and residential estate agents Knight Frank.
Instead, they are turning to logistics parks, data centres and specialised industrial projects linked to the country’s expanding digital economy.
The report shows returns from large shopping mall developments have declined as the market becomes saturated, while newer sectors such as warehousing and data infrastructure are attracting stronger investor interest.
The report shows Kenya’s real estate sector is entering a more selective phase, with investors prioritising quality, flexibility and infrastructure-driven projects over the aggressive retail and commercial construction boom that defined the last decade.
Large shopping malls, once seen as symbols of urban growth, are gradually losing dominance as consumers increasingly embrace e-commerce, convenience shopping and fast delivery services.
Developers are now focusing on smaller neighbourhood retail centres anchored by supermarkets, pharmacies, restaurants and essential services.
“Africa’s real estate landscape is transitioning into a more selective, performance-driven cycle, increasingly defined by quality and specialisation,” said James Lewis.
The growing demand for logistics facilities is being driven by regional trade expansion, rapid urbanisation and increased manufacturing activity within Special Economic Zones (SEZs).
Kenya is also strengthening its position as East Africa’s logistics hub through investments in transport corridors, industrial parks and SEZ-linked infrastructure.
The country’s warehousing and storage market reached $3.4 billion (Sh439.2 billion) in 2025 and is projected to grow at a compound annual growth rate of 6.51 per cent to $4.7 billion (Sh608 billion).
The growth is being supported by the rise of e-commerce, demand for faster delivery networks, expansion of manufacturing, improved road infrastructure and increasing regional trade across East Africa.
Businesses are also seeking modern storage and distribution centres that can support efficient supply chains and last-mile delivery services.
Knight Frank notes that prime serviced industrial land within major logistics corridors is becoming scarce as investor demand rises.
Data centres are also emerging as a major area of investment, with Kenya positioning itself as one of Africa’s fastest-growing markets.
The report estimates Africa’s data centre demand could grow between three and five times by 2030, requiring between $10 billion and $20 billion (Sh2.6 trillion) in fresh investment.
Oscar Matthews said multiple subsea cable landings in Mombasa, expanding fibre connectivity, Nairobi’s strong technology ecosystem and rising demand from cloud computing, fintech, and artificial intelligence firms are supporting Kenya’s growth.
“In East Africa, Kenya is emerging as a key hub, supported by multiple subsea cable landings in Mombasa, a strong enterprise ecosystem in Nairobi, policy support through Special Economic Zones, and an increasing focus on geothermal-powered energy solutions,” he said.
Forecasts indicate double-digit growth in Kenya’s installed data centre capacity through 2030 as hyper-scale cloud operators, streaming companies and AI-driven businesses expand across the region. The expansion is also being boosted by new fibre projects, including the 2Africa subsea cable linking Africa to Europe, Asia and the Middle East.
The office market is also changing as multinational firms move away from ageing office blocks and seek environmentally compliant Grade A buildings with flexible workspaces and lifestyle amenities.
Prime office occupancy in Nairobi has risen to about 80 per cent this year, with rents for premium office space stabilising at around $13 per square metre per month.
However, older office buildings continue to struggle with high vacancy rates, and the arrival of an additional 2.5 million square feet of office space between 2027 and 2028 is expected to increase pressure on landlords.
The report says this could trigger more refurbishments, mixed-use conversions and repurposing of outdated commercial properties. Flexible workspaces are also growing rapidly as companies prioritise agility and cost efficiency.
Meanwhile, Kenya’s high-end residential market remains resilient despite broader affordability challenges.
Prime residential sales prices rose by 6.17 per cent in the year to December 2025, while rental prices increased by 4.05 per cent, supported by diaspora investment, expatriate demand and wealthy buyers seeking integrated gated communities.
Developers are increasingly investing in mixed-use developments that combine housing, retail outlets, schools and lifestyle amenities within master-planned communities and SEZ-linked zones.
Tourism-linked real estate is also recovering strongly as visitor numbers rebound.
Kenya recorded about 7.9 million domestic and international visitors in 2025, including 2.7 million international arrivals, boosting demand for hotels, holiday homes and short-stay accommodation.
