In this article:

1. Why Conversion is Appealing

2. The Cost and Complexity Behind Conversions

3. Kenya’s Unique Challenges

4. The Financial Reality

WHY CONVERSION IS APPEALING

The city’s commercial property market is strong, with numerous office buildings, retail spaces, and mixed-use developments in areas like Nairobi CBD, Westlands, Kilimani, and Parklands.

However, as more people work from home, Nairobi’s commercial properties remain vacant.

On the other hand, the city struggles with a housing deficit estimated at over 2 million units, based on a report from the World Bank.

Because there are too many office buildings in the Central Business District and not enough homes, the concept of converting these office spaces into residential units seems like a silver bullet.

People see rows of vacant towers and think, Why not turn them into apartments instead of letting them sit empty?

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THE COST AND COMPLEXITY BEHIND CONVERSIONS

A typical modern office floor is a wide, open space with shared systems: a few restrooms per floor, centralized heating and cooling, and one big electrical grid for the whole floor.

Apartments, on the other hand, are small, self-contained units that each need their own systems.

Upgrading a commercial building to handle all this is rarely simple. Contractors must overhaul:

Plumbing and Sanitation:

Apartments need their own bathrooms and kitchens, which means adding new water pipes and sewage systems. Most office buildings only have a few shared restrooms, so changing them is expensive and hard to do.

Electrical Systems:

Apartments need separate electricity meters and wiring for each unit so that each tenant pays for what they use. Offices usually have one shared system, so changing this means rewiring the whole building, which can be very expensive.

HVAC Systems:

Office heating and cooling systems are made for big open spaces, not for separate apartments. Changing them for homes usually means installing new air ducts and climate control equipment, which costs a lot of money.

Fire and Safety Compliance:

Apartment buildings must follow stricter fire safety rules. Changing an office building to add more escape routes and fireproof materials can make the project much more expensive.

Structural Redesign:

Partitioning open-plan offices into apartments often requires new load-bearing walls, which may necessitate costly structural reinforcements, especially in older buildings not designed for such modifications.

The reality is that converting an office building into housing is rarely cheaper or easier than starting fresh.

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KENYA’S UNIQUE CHALLENGES

The local construction industry has extra challenges that make conversions even more expensive, such as:

Material Costs:

Building materials make up about 40% of the cost of housing in Kenya, and most of these materials are imported. A 17.5% tax on imported clinker and higher shipping costs because of problems in the Red Sea have pushed prices up, making it even harder to afford big conversion projects.

Labor and Skills Gap:

The lack of skilled labor and outdated training curricula mean that complex conversion projects would require expensive imported expertise or result in poor-quality work by local artisans, increasing long-term maintenance costs.

Regulatory Barriers:

Converting a building’s use in Kenya involves navigating a labyrinth of approvals from county governments and the National Construction Authority. Rezoning an office building for residential use can take months, with costs for permits, environmental impact assessments, and compliance adding up to 10% of project budgets.

Financing Constraints:

High interest rates (typically between 9% to 14% to for home construction loan) make financing conversions a gamble. With banks historically focused on high-end markets, securing capital for mid-tier or affordable housing conversions is a challenge.

THE FINANCIAL REALITY

Converting an office into apartments often falls closer to the higher end due to the need for extensive retrofitting.

In contrast, demolishing an old office building and constructing a new residential block allows developers to optimize for modern residential standards from the ground up, potentially saving 20-30% compared to conversions.

Conversions, with their high upfront costs, struggle to deliver units at these price points, especially when retrofitting older Class B or C office buildings, which often lack the structural flexibility for cost-effective transformation.

Rather than full conversions, integrating residential units into existing commercial buildings as part of mixed-use projects could balance costs and demand.

For more insights into construction costs and trends, consult the Institute of Quantity Surveyors of Kenya or visit integrum.co.ke for detailed cost analyses.

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P.S

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