The Kenya National Bureau of Statistics reported a substantial increase in the value of buildings approved for construction in Nairobi in 2023, totaling Sh217.04 billion, up by 33.6 percent from the previous year's Sh162.45 billion. This surge was mainly fueled by the residential buildings sector, which saw a growth in approvals that accounted for 82.9 percent of the total, a significant rise from 78.4 percent in the year before.
On the other hand, the commercial building segment saw a decrease in approvals, accounting for 17.1 percent in 2023 compared to 21.6 percent in the previous year. The commercial property market faced challenges due to oversupply before the Covid-19 pandemic, and the economic environment led to small businesses opting for smaller spaces while some companies adopted remote and co-working setups to reduce costs. The highest value of approvals in a single month in 2023 was observed in August at Sh31.7 billion, followed by July at Sh26.1 billion and December at Sh24.9 billion.
However, construction projects in Nairobi have been constrained by the high cost of materials, particularly cement, due to disruptions in key markets and the devaluation of the Kenyan shilling against major currencies like the US dollar. The cost of building increased by 2.71 percent year-on-year in the third quarter of 2023, driven by a rise in the prices of cement, steel, fuel, and other essential inputs. The depreciation of the Kenyan shilling against the US dollar significantly impacted the cost of construction inputs, as Kenya heavily relies on imported materials like steel, cement clinker, fuel, machinery, and equipment.
Despite the growth in approvals for construction, challenges such as the high cost of building materials have implications for the construction industry and the affordability of housing in Nairobi. The decrease in cement consumption over the year also reflects the impact of these challenges on the sector, showcasing the need for measures to address the rising costs and make construction more sustainable and affordable for future projects in the city.