Real Estate Investment Case: Nairobi & Mombasa (2020–2024) | Gidi

Kenya’s real estate market has expanded steadily over the last five years, recording an estimated 33.7% rise in sector output between 2019 and 2023. This trajectory has been sustained by rapid urbanisation, infrastructure expansion, policy reforms, and growing investor participation.

Within this broad national outlook, Nairobi and Mombasa have emerged as the two most strategic cities shaping the investment direction of the sector. Each city reflects a distinct development pattern, shaped by different economic bases, market structures, and policy frameworks.

GIDI’s investment perspective on both locations aligns with a long-term view of real estate as a driver of structural transformation in African cities. The analysis below outlines the dominant trends between 2020 and 2024, the most active segments, the underlying market forces, and the investment logic they represent.

Nairobi: Growth Trends and Opportunities

Economic Context and Market Dynamics

Nairobi accounts for more than a quarter of Kenya’s GDP, functioning as its principal economic and commercial hub. It remained resilient through the pandemic years and entered a steady recovery cycle by 2023. A combination of moderate GDP growth (around 4.7% projected for 2024), infrastructure investments, and urban expansion has sustained investor confidence and activity across different asset classes. While not immune to macroeconomic shocks, Nairobi’s property market has displayed relative stability and depth.

Segment Performance

Commercial Offices

Nairobi’s position as the business and diplomatic capital of East Africa makes its commercial office market one of the most active in the region.

However, an oversupply of prime office stock has lowered occupancy to about 72.7% as of 2024. The downward pressure on rents has stabilised prices, creating entry opportunities for investors with a medium- to long-term horizon. As business activity consolidates and absorption catches up, well-positioned assets acquired during this phase are likely to appreciate.

Retail and Mixed-Use Developments

The city’s retail market has remained active despite macroeconomic headwinds. New malls and retail centres have continued to open in suburban and peri-urban corridors, reflecting the purchasing power of a growing middle class. Global and regional retailers such as Carrefour and Decathlon have expanded their footprints, indicating the depth of consumer demand. Mixed-use projects integrating retail, residential, and office spaces have gained traction, particularly around fast-growing suburban belts

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Residential Housing
The residential segment continues to experience sustained demand, particularly in affordable and middle-income brackets. The combination of rising population, urban in-migration, and expanding transport networks has shifted housing growth toward satellite towns such as Juja, Ruiru, Kikuyu, and Ngong.

Land in these locations remains cheaper than in the core city, with improved connectivity accelerating their transformation into residential hubs. High-end residential prices have remained largely stable, but affordable and mid-tier housing have experienced consistent absorption and steady price appreciation.

Industrial and Logistics
The logistics and light industrial segments have quietly become one of the most promising areas of Nairobi’s real estate. E-commerce growth and Kenya’s position as a regional distribution hub have increased demand for warehousing and logistics infrastructure. Special Economic Zones (SEZs) such as Athi River and Nairobi Gate Industrial Park have attracted significant capital inflows through tax incentives and serviced infrastructure.

The Nairobi Gate SEZ alone added approximately 130,000 sq. ft. of warehousing space in 2024, pushing total logistics capacity above 550,000 sq. ft. The sector’s fundamentals point to sustained demand and favourable yield profiles for institutional investors.

Hospitality and Tourism
Nairobi’s hospitality market contracted sharply in 2020 but recovered gradually with rising business travel and conferencing activity. Tourist arrivals in Kenya reached record highs in 2023, and the city’s hospitality assets benefited accordingly. New hotels opened in 2022 and 2023, expanding the city’s room inventory. Although occupancy rates remain lower than Mombasa’s leisure market, steady growth in corporate travel and events positions the segment for stable expansion over the next few years.

Policy and Regulatory Environment
Affordable Housing Initiative
The government has anchored affordable housing as a national priority. The 2023/24 introduction of a housing levy created a funding base for large-scale projects, enabling public–private partnerships to flourish. Thousands of units are under development across Nairobi and surrounding counties, supported by offtake guarantees and targeted financing. This initiative is gradually reshaping the supply side of the housing market and creating investment entry points for developers and mortgage-backed investors.

Credit and Monetary Conditions
High interest rates between 2022 and 2023 raised borrowing costs and limited access to credit for both developers and buyers. This adjustment slowed speculative construction and opened space for more structured financing vehicles such as Real Estate Investment Trusts and diaspora capital inflows. As inflation moderates and interest rates ease, liquidity is expected to return to the sector, unlocking delayed projects and improving transaction volumes.

Infrastructure Expansion
Transport investments remain a defining factor in Nairobi’s market transformation. Projects such as the Nairobi Expressway, Eastern and Northern Bypass upgrades, and expanded commuter rail have reduced congestion and extended the metropolitan footprint. Peripheral zones such as Kitengela, Athi River, Thika, and Limuru are benefiting directly from these improvements. Alongside the expansion of Jomo Kenyatta International Airport and the planned Konza Technopolis, these projects strengthen Nairobi’s position as a competitive metropolitan market.

 

Investment Outlook: Nairobi
Nairobi’s real estate environment is defined by scale, structural demand, and relative market maturity. Its strongest segments are mid-income housing, logistics, and specialised commercial assets such as business parks and data centres. Oversupply in the prime office and high-end retail segments presents an opportunity for value-based acquisition rather than a structural weakness.

As macroeconomic conditions stabilise, the city’s expansion corridors will deliver measurable returns, reinforcing Nairobi’s role as Kenya’s flagship property market.

Mombasa: Growth Trends and Opportunities

Economic Context and Sector Recovery

Mombasa contributes approximately 4.9% of the national GDP, serving as the country’s coastal commercial anchor. Its economy is built on two principal pillars: tourism and port logistics. After a severe contraction in 2020, the city rebounded strongly as visitor arrivals surpassed pre-pandemic levels by 2023. This resurgence restored confidence in the hospitality segment and created spillover demand across residential, commercial, and logistics assets.

Segment Performance
Hospitality and Tourism

Hospitality remains Mombasa’s dominant real estate segment, accounting for roughly 45% of the coastal economy. The city and its environs host over 130 hotels and resorts with more than 4,800 rooms. Beachfront resorts consistently post higher occupancy levels than Nairobi’s city hotels, driven by both leisure and conference tourism. Revenue per room has steadily increased since 2021, with post-election stability reinforcing investor confidence. Beyond resorts, serviced apartments, destination-themed properties, and conference facilities present strong growth opportunities.

Residential and Commercial

Mombasa has witnessed increased demand for quality housing from both local buyers and diaspora investors. Premium developments around Nyali and other high-value suburbs have gained traction, while middle-income housing is expanding steadily. The retail market is also growing, with malls and mixed-use centres such as City Mall and Nyali Centre serving the rising coastal consumer base. The city remains under-supplied in Grade A office stock, creating a clear opening for investors in commercial property.

Industrial and Logistics
Mombasa is the principal maritime gateway to East Africa, handling over 1.4 million TEUs annually. The port’s logistics ecosystem generates demand for storage facilities, freight yards, and industrial clusters. The Dongo Kundu Special Economic Zone is central to the city’s next growth phase, designed to attract export-oriented industries through tax incentives and serviced land. This segment is expected to benefit from both port expansion and improved transport connectivity.

Infrastructure and Policy Enablers
Transport Infrastructure

The last four years have seen unprecedented infrastructure investment along the coast. Key projects include the Standard Gauge Railway, Mombasa–Nairobi Highway upgrades, new bridges, and the ongoing Mombasa–Mtwapa Highway dual carriageway. These interventions have strengthened linkages between the port, city, and surrounding counties, driving up land values and opening new development nodes.

Government Initiatives

The Dongo Kundu SEZ is positioned to transform Mombasa into a competitive industrial hub. Alongside this, national blue economy initiatives are broadening the city’s economic base to include cruise tourism, fisheries, and marine logistics. The county government’s affordable housing partnerships reflect an alignment with national housing policy. Digitisation of land registration and titling has reduced opacity and improved investor confidence.

Investment Outlook: Mombasa
Mombasa’s real estate growth is being shaped by a dual engine of tourism resurgence and infrastructure expansion. The hospitality sector remains its strongest lever, but logistics and industrial assets are emerging as the next frontier. Its relatively lower entry costs compared to Nairobi give investors an early positioning advantage. With sustained infrastructure investment and policy support, the city is poised for a strong upward cycle over the medium term.

Conclusion
Nairobi and Mombasa represent two complementary investment corridors within Kenya’s real estate landscape. Nairobi provides scale, structured demand, and diversified opportunities across housing, logistics, and commercial segments. Mombasa offers sharper growth potential anchored in tourism, port infrastructure, and emerging industrial development.

For investors, policymakers, and market stakeholders, the investment case is clear: Nairobi represents the steady core of Kenya’s property market, while Mombasa provides early access to high-growth segments. A portfolio strategy that balances both cities positions investors to capture the breadth of Kenya’s real estate expansion.