Why Nairobi is a global city in the making

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Nairobi has long been known as one of Africa’s most dynamic cities. Now, as its growing economy and rising prosperity levels fuel a development boom, it’s fast building a reputation as one of the world’s most dynamic cities.

Kenya’s capital has soared to tenth in JLL’s latest City Momentum Index, despite only entering the top 30 last year. Its meteoric rise reflects its position as an emerging powerhouse with a huge role to play in helping Kenya realise its potential as one of Africa’s great success stories. Figures are charting upwards for key boom-time indicators such as GDP, population, enrolment in education and life expectancy, although with a poverty headcount ratio of 45 percent as recently as 2005, there remains a long way to go.

Nairobi is by no means the largest city in Africa but with an estimated population of 4 million, it is still around the size of Berlin.

The high proportion of the Kenyan population under the age of 55, which is estimated to be around 93 percent, and especially strong concentration of those under 25 (60 percent) are clear indicators of the poor historic record on life expectancy in Africa, exacerbated by the impact of diseases such as malaria and HIV/AIDS.

That same youthful demographic does also, however, carry great potential. As Lucy Githinji, Associate Director, Corporate Solutions, for Sub-Saharan Africa at JLL, explains: “Nairobi is well established as a gateway to East Africa and the preferred destination for corporate HQs, but more recently it’s emerged as a regional tech hub.”

It is home to the iHub, the continent’s most successful incubator for tech-based start-ups, for example, plus the IBM research centre for Africa. It is also in the vanguard of mobile payment technologies, lead by M-PESA.

Much of this sector success is driven by the availability of an educated, young population that represents a local talent pool ideally suited to the tech industry, says Githinji.

The Silicon Savannah

Dubbed the ‘Silicon Savannah’, Nairobi has been lauded as the most ‘intelligent city’ in Africa.

“Kenya is also attracting talent from other East African countries and beyond, to the point where I believe Nairobi has now surpassed the rest of Africa in the tech space and is competing with cities on the world stage,” says Githinji.

Its meteoric rise is not the stuff of some temporary tech bubble, though, but signals a rather more sustainable development path, according to Dr Richard Munang, Coordinator, Africa Regional Climate Change Programme, United Nations Environment Programme (UNEP). “The revolutionary M-PESA, for instance, is bridging the inclusion gap. Since its inception, the percentage of Kenyans with any sort of access to formal financial institutions has nearly tripled,” he says.

The IMF reported that M-PESA ‘processes more transactions domestically within Kenya than Western Union does globally’. The knock-on effects of individual tech successes are serving as a shot in the arm for the sector as a whole. Dr Munang adds: “The iHub has spawned 150 start-ups and created over 1300 jobs. In addition, leading global technology companies including Google, Intel and Microsoft are partnering with these tech hubs, transferring technical capacity and providing a platform for wider marketing of Kenyan applications.”

But the continent’s inherent infrastructure challenges remain a concern. Underpinning all future expectations are the twin foundations of energy and telecoms connectivity. As Githinji says: “Extending and improving power and internet networks will be key to ongoing development and further aspirations, not necessarily in Nairobi itself, but more in the wider country. Nairobi businesses would then be able to benefit in terms of their ability to collaborate and outsource nationwide, so drawing on an even bigger talent pool throughout Kenya.”

The Government is responding, with ambitious plans for power generation and distribution, as well as programmes to boost internet access, including tech education right from primary stage, designed to foster the next generation of coders and entrepreneurs.

Creating a ‘copycat culture’

In terms of the accompanying investment in real estate, development and construction, the local market in Nairobi is under some pressure to adapt and innovate, suggests Githinji. “Like attracts like, so with the technology sector growing, the hope is that marquee names such as IBM and Google will help to lure other key players to Nairobi, stimulating demand for high-end commercial property,” she says. “The challenge will be to meet the new needs of these tech-oriented clients and avoid the pitfalls of speculative white-elephant projects.”

And that has big implications for future real estate developments. “Investors had perhaps become used to delivering big-but-basic real estate and still finding occupiers on a relatively quick turnaround,” says Githinji. “Their level of ambition was modest. Now, with something of a glut of speculative space, end-user choice is up and competition increased.”

As a result, there is clear momentum in the market, Githinji believes. “What we hope to see is a copycat culture where aspiring developers look to emulate the successes of their more internationally-attuned counterparts, leading to increasing market maturity.

“Whether you call it peer pressure or a domino effect, once developers are seen to be enjoying success and quick returns catering to this emerging tech client base, attitudes will change for the better. We are now at the beginning of that upward trend,” she concludes.

Courtesy of Real View | JLL

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