The value of approved construction projects in Nairobi experienced a notable upswing in 2023, increasing by 33.6% to reach KES 217.04 billion, signaling a robust recovery in the residential housing market from KES 162.45 billion in 2022.
Data from the Kenya National Bureau of Statistics (KNBS) indicates a substantial rise of KES 54.59 billion compared to the preceding year.
This growth was primarily fueled by residential buildings, which accounted for 82.9% of the approvals in 2023, up from 78.4% in the previous year. Conversely, approvals for commercial buildings in Nairobi decreased to 17.1% in 2023 from 21.6% in the preceding year.
The commercial property sector, initially grappling with oversupply, encountered further challenges due to a challenging economic environment, leading smaller businesses to opt for reduced spaces and companies to adopt remote and co-working setups to mitigate costs.
August 2023 marked the highest value of approvals in a single month at KES 31.7 billion, followed by July at KES 26.1 billion, and December at KES 24.9 billion.
However, construction projects faced obstacles due to soaring material costs, particularly cement, driven by disruptions in key supply markets and the devaluation of the Kenyan shilling against major world currencies.
The overall building costs surged by 2.71% year-on-year in the third quarter of 2023, attributed to increased costs of cement, steel, fuel, and other essential inputs.
The substantial depreciation of the Kenyan shilling against the US dollar significantly affected the prices of construction inputs during the period under review.
Kenya’s dependence on imported construction materials such as steel, cement clinker, fuel, machinery, and equipment further exacerbated these cost hikes. Consequently, cement consumption experienced a slight decline in the nine months leading up to September, falling from 7.09 million tonnes to 7.02 million metric tonnes compared to the previous year.
