Political uncertainty and tighter financing conditions are prompting developers to delay new projects, while capital shifts toward segments backed by structured funding and resilient demand.
- •New developments are slowing across speculative commercial and high-risk residential segments as borrowing costs remain elevated and investors adopt a wait-and-see stance ahead of the election cycle.
- •Developers are prioritising cash preservation and focusing on completing ongoing projects rather than launching new builds.
- •Election cycles typically trigger a wait-and-see approach among investors and financiers, leading to tighter capital flows and a stronger emphasis on cash-generating assets.
“2026 will be a year for disciplined execution and strategic positioning," says Mark Dunford, CEO of Knight Frank Kenya, "The markets rewarding quality, sustainability, and clear demand fundamentals will thrive, while those chasing speculative growth will pause. Growth will be most pronounced in segments backed by targeted financing and in resilient asset classes.”
Affordable housing projects, often backed by public-private partnerships and concessional funding, continue to attract capital as developers pivot toward lower-risk, policy-aligned investments. Prime office space, particularly Grade A buildings with strong occupancy and multinational tenants, is also showing resilience, supported by stable corporate demand and flight-to-quality trends among occupiers seeking efficient, modern workspaces.
Special Economic Zones (SEZs) are emerging as another bright spot, benefiting from investor incentives, logistics expansion, and continued interest from manufacturing and export-oriented firms positioning for regional trade growth.
The Mixed Signals
A new market update from Knight Frank Kenya shows the value of approved building plans in Nairobi fell by about 24% year-on-year, signalling a strategic pause as developers prioritise completing existing projects amid macroeconomic stabilisation and political uncertainty.
“The slowdown reflects a broader shift in investor sentiment as the industry moves into a consolidation phase, balancing improved economic stability against election-cycle caution and persistent financing constraints,” Kinght Frank Data points out .
Despite Kenya’s economy expanding by an estimated 4.9% in 2025 and expected to maintain similar growth in 2026, developers are focusing on absorbing existing inventory rather than launching speculative projects. This shift is reinforced by a widening infrastructure financing gap and the growing reliance on public-private partnerships and foreign capital to sustain major construction initiatives.
Even as construction activity cools, Kenya’s residential market shows signs of resilience, particularly in Nairobi, where subdued property price growth and sustained rental demand have pushed yields to their highest levels in two decades. According to the latest HassConsult property index, Nairobi’s suburban property prices rose by 0.8% in the fourth quarter of 2025, while rents rose 1.5%, lifting rental yields to 7.4 %—the highest since records began in 2007.
Across the capital’s satellite towns, stronger demand drove sales prices up by 4.5% and rents by 8.7%, raising yields to 5.2%, their highest since 2019. The strongest rental growth was recorded in Ruiru and Kiambu, where annual rent increases reached 15.6% and 14.4% respectively, reflecting continued migration toward affordable commuter towns.
Within Nairobi’s prime suburbs, rental growth remained strong in high-end areas such as Ridgeways and Lavington, where rents rose by 9.6% and 9% respectively, while sales price gains were more subdued due to increased housing supply. Apartment markets reflected similar trends, with uneven price movements across neighbourhoods as developers completed large projects that temporarily increased supply, particularly in Westlands and Upper Hill, before stabilising toward the end of the year.
