Kenya's real estate sector delivered a remarkably positive performance in 2025, buoyed by favourable monetary policy, rising investor confidence, and significant infrastructure development. Against a backdrop of steady GDP growth and declining interest rates, the market demonstrated resilience across multiple asset classes. In this article, we examine the key highlights that defined the Kenyan property landscape over the past year.
Affordable housing: Government ambition meets private sector delivery
The Affordable Housing Regulations 2025 came into effect in July 2025, operationalising key provisions of the Affordable Housing Act and providing the regulatory certainty that developers and financiers had long awaited. By early 2026, more than 240,000 units were under development countrywide, representing a significant scaling-up of the government's housing programme.
A landmark milestone was reached in December 2025 with the handover of 4,500 completed units under the Mukuru Affordable Housing Project, demonstrating that large-scale delivery is achievable within Kenya's regulatory framework. Private sector participation intensified, with developers such as TSAVO, IHS Kenya, and Acorn Holdings committing substantial capital to the segment, incentivised by a reduced 15% corporate tax rate for qualifying developers. This incentive has since been removed by the Finance Act, 2026 which deleted the preferential 15% rate, and removed VAT exemptions on construction inputs, effective 1 July 2026.
Residential market: solid returns amid structural demand
The HassConsult House Price Index confirmed residential property prices rose 7.8% year-on-year through mid-2025, and Knight Frank reported 5.6% growth in prime property values.
Lower-to-mid-end satellite town apartments proved particularly attractive, offering returns of approximately 7.7% with overall occupancy around 93.7%. The demand for affordable housing has surged, prompting developers to focus on constructing budget-friendly residential units. The sustained demand reflects Kenya's enduring housing deficit, estimated at over 2 million units, which continues to underpin residential sector fundamentals.
Commercial office market: recovery gathers pace
Nairobi's commercial office market staged a notable recovery in 2025. Prime office occupancy climbed from 77.71% to 81.58% by December 2025, representing a 4.98% increase. Commercial office yields increased to 8.9% from 7.8% in 2024, while average asking rents rose 5.7% to KSh 111 per square foot. Prime rents remained stable at approximately USD 1.20 per square foot per month, reflecting sustained demand from multinational corporates and regional headquarters.
Hospitality: tourism-led growth
Kenya's hospitality sector benefited from a strong rebound in tourism, with approximately 2.4 million international tourist arrivals recorded in 2024, representing a 15% year-on-year increase. Tourism earnings reached KES 452.20 billion (approximately USD 3.5 billion), up 19.8% year-on-year. Nairobi hotel occupancy stood at 56%, with safari regions achieving 75%, and average daily rates rose approximately 15% year-on-year. International brands including Marriott, Accor, and Radisson continued their expansion in Kenya, signalling long-term confidence in the market.
Industrial and logistics: the breakout segment
The industrial and logistics sector emerged as arguably the most dynamic asset class in 2025. Kenya's construction sector expanded 6.7% in Q3 2025, with cement consumption surging 21% year-on-year in the first eleven months of the year.
Landmark transactions included the KES 65 billion Tatu City Special Economic Zone development deal, Isuzu East Africa's KES 3.1 billion Parts Distribution Centre in Lukenya, and the KES 5 billion Kenanie Leather Industrial Park. Further activity included the KES 19 billion Olkaria electric vehicle assembly plant and County Aggregation Industrial Parks receiving a KES 4.45 billion allocation.
Capital Markets and REITs: a maturing ecosystem
Kenya's real estate investment trust (“REIT”) market reached an inflection point in 2025. The ALP Industrial USD REIT was licensed in November 2025 and subsequently listed on the Nairobi Securities Exchange on 11 March 2026, as the exchange’s first USD-denominated security. The TRIFIC Green USD income REIT was licensed in September 2025, representing Kenya's first green-themed REIT. The Capital Markets Authority's REIT incubator initiative further demonstrated the regulator's commitment to developing this asset class.
Favourable monetary policy and investment flows
The Central Bank of Kenya delivered 10 consecutive rate cuts from August 2024 to February 2026, reducing the CBK Rate from 13% in August 2024 to 8.75% by December 2025, a total easing of 425 basis points, before pausing in April 2026. The introduction of the Kenya Overnight Interbank Average (KESONIA) benchmark in September 2025 provided a more transparent basis for variable-rate lending. The publication of the Kenya Green Finance Taxonomy and Climate Risk Disclosure Framework in April 2025 further signalled Kenya's commitment to sustainable finance.
Investment flows remained robust. Diaspora remittances reached a record USD 5.08 billion to June 2025, while the European Investment Bank committed EUR 21.5 million to the IHS Kenya Green Housing Fund.1 Kenya's GDP grew 4.6% in 2024, with the real estate sector contributing 8.4% of national output.
Infrastructure Unlocking Satellite Town Value
Major infrastructure investments continued to unlock value in Nairobi's satellite towns. The Nairobi Expressway and various highway expansions enhanced connectivity to outlying areas, while Special Economic Zone expansions attracted industrial and logistics operators.
Conclusion
The Kenyan real estate market in 2025/2026 presents a picture of growth underpinned by structural demand, supportive policy, and a maturing capital markets ecosystem. For investors, developers, and occupiers, the highlights of this period affirm Kenya's position as one of East Africa's most dynamic property markets. As we look ahead, the foundations laid in 2025, from affordable housing delivery to REIT expansion and infrastructure investment, position the sector well for sustained performance.
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