Nov 23, 2025

In November 2024, we released the Nairobi Metropolitan Area Mixed-Use Developments (MUDs) Report 2024 which highlighted that Mixed-Use Developments recorded an average rental yield of 8.6%, 1.5% points higher than the respective single-use themes which recorded an average rental yield of 7.1% in a similar period in 2023. The relatively better performance was mainly attributed to; i) heightened demand for prime locations attracting clients willing to pay premium rents, ii) strategic and prime locations of the developments with the capability to attract prospective clients, and, iii)) the area’s proximity to amenities such as shopping malls enhancing the desirability.

This week we update our report with 2025 market research data in order to determine the progress and performance of MUDs against the market performance of single-use Residential, Commercial Office, and Retail developments. Therefore, this topical will cover the following:

1. Overview of Mixed-Use Developments,
2. Mixed-Use Developments Performance Summary in 2025, and,
3. Mixed-Use Developments Investment Opportunity and Outlook.

Section I:  Overview of Mixed-Use Developments

A Mixed-Use Development (MUD) is an urban development that integrates various real estate functions, including residential, commercial, retail, and hospitality components. By combining these diverse uses, a single development can fulfill multiple purposes within one location, offering enhanced convenience by bringing living, working, and recreational spaces together. This integration of different functions provides easy access to amenities and services, making MUDs increasingly popular in Kenya as they respond to the evolving lifestyles and demands of clients. For the year 2025;

1. Business Bay Square developer announcedplans to invest Kshs 65.0 bn in a 60-acre mixed-use development at Tatu City. The project marks a strategic expansion by the Eastleigh-based investor into large-scale ventures beyond Nairobi’s central business district. The ambitious development will comprise residential units, office spaces, retail outlets, warehouses, and a mosque. Construction is expected to commence within the next year and will span approximately a decade under the Tatu City Special Economic Zone framework. For more information, please see our Cytonn Weekly # 42/2025.

Some of the factors that have been driving the growth of MUDs include;

1. Growing Demand: with relatively high urbanization and population growth rates of 3.7% p.a and 2.0% p.a, respectively, against the global average of 1.7% p.a and 1.0% p.a, respectively, as at 2024. This trend drives a strong demand for development, supporting the expansion and success of Mixed-Use Developments (MUDs). Additionally, the market's need for flexible, integrated spaces that cater to diverse needs has led to the rise of Mixed-Use Developments (MUDs). MUDs offer a comprehensive solution by combining residential, commercial, and recreational components within a single development,
2. Change in Urban lifestyle and Consumer preferences: Shifting urban lifestyles and consumer preferences are driving demand for Mixed-Use Developments (MUDs). These developments offer convenient, integrated living experiences that align with modern lifestyles. As a result, Kenya is witnessing a surge in MUD construction. Consumers are in a position to access all services they require within a single development,
3. Relatively Higher Investment Returns: MUDs offer greater financial potential than single-use developments. By combining various real estate uses, investors can diversify income streams from property sales and leases of office, residential, retail, and recreational spaces,
4. Improved Infrastructure: Recent infrastructure developments by the government, such as the Nairobi Expressway and Western Bypass, have facilitated the growth of Mixed-Use Developments. Improved infrastructure enhances connectivity and accessibility, creating favorable conditions for these integrated developments,
5. Optimal Land Utilization: MUDs maximize land utilization by integrating multiple functions into a single development. This is especially beneficial in urban areas with limited land availability and growing populations,
6. Strategic Locations: MUDs are typically situated in well-connected urban areas, attracting a diverse range of residents and businesses, including high-income individuals seeking convenience,
7. Diversification: MUDs offer a diversified investment strategy by combining multiple Real Estate asset classes. This reduces risk exposure to fluctuations in a single market segment, and,
8. Aspect of Sustainability: Mixed-Use Developments seamlessly integrate different real estate classes in a single project and location, optimizing space usage. This reduces commuting needs as residents can live, work, and shop all within one locale, contributing to a more sustainable lifestyle.

Despite the aforementioned factors, there exist various setbacks hindering the development and performance of MUDs such as:

1. High Development Costs: Developing and financing Mixed-Use Developments (MUDs) tends to be more expensive than single-use projects, largely due to the complex designs required to ensure smooth integration of varied real estate functions. Balancing appeal with functionality adds challenges for developers seeking funding from banks and other stakeholders. Despite this, construction costs in Kenya showed signs of stabilization, largely supported by subdued inflation of 6% y/y as of July 2025 and a relatively stable currency. According to the Kenya National Bureau of Statistics (KNBS) Q2’2025 Construction Input Price Indices Report, the Building Cost Index (BCI) increased slightly to 119.8 in Q2’2025 from 119.1 in Q1’2025, marking a 0.6% quarter-on-quarter increase. This indicates a moderation in construction cost growth, driven by steadier prices for key inputs such as fuel, steel and transport. Prices for specific materials, however, continued to rise modestly; cement increased by 2.6%, quarry products by 2.7%, and sand by 1.4%, suggesting that while input inflation is moderate, developers are still facing some upward pressure in select areas,
2. Oversupply in Select Real Estate Sectors: Existing oversupply of physical space in select sectors. With approximately 5.7 mn SQFT in the NMA commercial office market, and approximately 3.0 mn SQFT in the Nairobi Metropolitan Area (NMA) retail market, which in turn hinders optimum performance of the developments, and,
3. Coordinating Diverse Uses: Successfully integrating the varied uses within MUDs can be challenging, as each real estate component has unique needs and requirements. Achieving the right balance requires careful management, ensuring that tenants complement one another and align with the development’s overall objective which can be complex to implement effectively.

Section II:  Mixed-Use Developments Performance Summary in 2025

1. Summary of MUDs Performance in Comparison to General Market Performance

Mixed-Use Developments recorded an average rental yield of 8.7% in 2025, 0.1% points higher than the respective single-use themes which recorded an average rental yield of 7.1% in a similar period the previous year. The relatively better performance was mainly attributable to changing client preferences and MUDs' attractiveness driven by the diversity in amenities and social offerings they provide to clients.

Both the office and retail themes in the MUDs recorded 0.4% points increase in average rental yields to 8.6% and 10.5% respectively in 2025, from 8.2% and 10.1 % in 2024. This increase was primarily driven by the addition of prime spaces commanding higher rents and yields and aggressive expansion efforts by both local and international retailers such as Carrefour, China square and Naivas, contributed to the growth during the period under review. For the Residential theme in the MUDs, the average rental yield decreased by 0.2% to 7.2% in 2025, from 7.4% in 2024. The decrease in performance was primarily influenced by a decrease in asking rents to Kshs 1,082 per SQM from Kshs 1775 per SQM in 2024

The table below shows the performance of single-use and Mixed-Use development themes between 2024 and 2025;

Cytonn Report: Thematic Performance in MUDs Vs. Key Nodes Hosting MUDs Market Performance 2024-2025
	MUD Themes Average		Market Average
	Rental Yield % 2024	Rental Yield % 2025	Rental Yield % 2024	Rental Yield % 2025	∆ in y/y MUD Rental yields	∆ in theme Rental Yields
Retail	10.1%	10.5%	8.2%	8.3%	0.4%	0.04%
Offices	8.2%	8.6%	7.2%	7.6%	0.4%	0.4%
Residential	7.4%	7.2%	6.1%	5.5%	(0.2%)	(0.5%)
Average	8.6%	8.7%	7.2%	7.1%	0.2%	(0.04%)
* Market performance is calculated from nodes where sampled MUDs exist

Source: Cytonn Research

2. Mixed-Use Developments Performance per Node

In terms of performance per node, Karen, Kilimani, and Westlands were the best performing of all sampled nodes with an average yield of 10.7%, 9.6%, and 9.6% respectively; 2.0% and 0.9% higher than the market average of 8.7% in 2025. The strong performance was mainly attributed to: i) a large base of residents with substantial consumer spending power, ii) robust infrastructure supporting investment opportunities, and iii) the availability of prime retail and office spaces commanding higher rents and yields. On the other hand, Mombasa Road recorded the lowest performance with an average rental yield of 7.6%, 1.5% lower than the market average of 8.7%. This performance can be attributed to; i) heavy traffic on Mombasa Road potentially deterring businesses and residents, reducing demand and rental yields, ii) low rental rates attracted by developments, and iii) the area's perception as an industrial hub reducing appeal for high-rent tenants. The table below shows the performance of Mixed-Use Developments by node in 2025;

Cytonn Report: Nairobi Metropolitan Area Mixed Use Developments Performance by Nodes 2025
Location	Commercial Office			Commercial Retail			Residential				Average MUD Yield
	Rent (Kshs/SQFT)	Occupancy	Rental Yield	Rent (Kshs/SQFT)	Occupancy	Rental Yield	Price (Kshs/SQM)	Rent (Kshs/SQM)	Annual Uptake	Rental Yield
Eastlands	92	72.5%	6.4%	232	87.0%	10.4%					8.4%
Karen	129	85.0%	9.6%	270	95.0%	11.8%					10.7%
Kilimani	121	85.4%	9.1%	186	88.0%	10.2%					9.6%
Limuru Road	113	77.5%	7.8%	305	77.5%	12.9%	180,396	1,314	23.1%	7.9%	9.5%
Mombasa road	112	70.0%	7.4%	205	77.5%	9.0%	427,404	693	8.6%	6.5%	7.6%
Thika road	120	82.7%	9.2%	207	81.7%	9.8%	145,260	766	11.7%	5.3%	8.1%
UpperHill	112	87.0%	9.3%	173	80.0%	9.7%					9.5%
Westlands	129	79.8%	9.7%	204	75.4%	10.1%	287,314	3,460	8.5%	9.1%	9.6%
Average	116	80.0%	8.6%	223	82.8%	10.5%	260,093	1,558	13.0%	7.2%	8.7%
*Selling prices used in the computation of rental yields for commercial office and retail themes entailed a combination of both real figures and market estimates of comparable properties in the locations of the Mixed-Use Developments (MUDs) sampled

Source: Cytonn Research

3. Performance of Real Estate Themes in MUDs versus Single-themed Developments’ Performance

In our Mixed-Use Development analysis, we looked into the performance of the retail, commercial office, and residential themes:

1. Retail Space

The average rental yield of retail spaces in Mixed-Use Developments came in at 10.5% in 2025, 2.2% points higher than single-use retail developments that realized an average rental yield of 8.3%. This was mainly attributable to the high rental rates that MUDs generated at Kshs 223 per SQFT when compared to the Kshs 200 per SQFT recorded for the single-use retail spaces owing to the availability of prime quality spaces attracting higher rental rates. 

Limuru Road and Karen nodes continued to register the best performance with the average rental yield at 12.9% and 11.8% significantly higher than the market average of 10.5%. This was mainly driven by; i) relatively stable occupancy rates ii) increased and relatively higher rental rates which translates to higher returns, iii) the presence of residents with high incomes and significant purchasing power, and, iv) the availability of sufficient infrastructure and connectivity that effectively supports the MUDs. Conversely, Mombasa Road recorded the lowest rental yields at 9.0%, 1.5% points lower than the market average of 10.5%. This can be attributed to relatively lower rental rates of Kshs 205 in comparison to the market average of Kshs 223 and the popularity of the area as an industrial zone. The table below provides a summary of the performance of retail spaces in MUDs against market performance in 2025;

All values in Kshs Unless Stated Otherwise
Cytonn Report: Performance of Retail in MUDs Vs. Market Performance 2025
Location	MUD Performance			Market Performance
	Rent/SQFT	Occupancy (%)	Rental Yield (%)	Rent/SQFT	Occupancy (%)	Rental Yield (%)
Limuru Road	305	77.5%	12.9%	211	75.7%	9.2%
Karen	270	95.0%	11.8%	225	84.5%	9.5%
Eastlands	232	87.0%	10.4%	150	78.2%	6.4%
Kilimani	186	88.0%	10.2%	204	81.7%	9.9%
Westlands	204	75.4%	10.1%	246	79.9%	7.2%
Thika road	207	81.7%	9.8%	193	79.8%	7.5%
UpperHill	173	80.0%	9.7%
Mombasa road	205	77.5%	9.0%	174	80.1%	8.3%
Average	223	82.8%	10.5%	200	80.0%	8.3%

Source: Cytonn Research

2. Commercial Office Space

The average rental yield for commercial office spaces in MUDs came in at 8.6%, 1.0% points higher than single-use commercial developments which realized an average rental yield of 7.6% in 2025. The performance by MUDs was largely attributed to the high rental rates chargeable per SQM within the developments driven by; i) Strategic locations attracting multinationals and international organizations, boosting demand for these spaces, and, ii) High rental rates for prime Grade A offices are driven by their exceptional quality, and sustainability features.

In terms of submarket performance, Westlands, Karen, and Upperhill were the best-performing nodes posting average rental yields of 9.7%, 9.6%, and 9.3% attributable to; i) the presence of high-end business parks Sarit, GTC, the Hub and Galleria, offering high rental rates and returns, ii) quality and ample infrastructure improving accessibility to the nodes, iii) quick access to the CBD, and, iv) increasing demand for these spaces. In contrast, Eastlands exhibited the lowest performance among nodes, with an average rental yield of 6.4%, primarily due to: i) lower-quality office spaces with lower rental rates, and, ii) Insufficient infrastructure to adequately support MUDs. The table below shows the performance of office spaces in MUDs against the single-use themed market in 2025;

All Values are in Kshs Unless Stated Otherwise
Cytonn Report: Performance of Commercial Offices in MUDs Vs. Market Performance 2025
Location	MUD Performance			Market Performance
	Rent/SQFT	Occupancy (%)	Rental Yield (%)	Rent/SQFT	Occupancy (%)	Rental Yield (%)
Westlands	129	79.8%	9.7%	120	82.8%	9.5%
Karen	129	85.0%	9.6%	115	81.5%	8.0%
UpperHill	112	87.0%	9.3%	104	75.6%	7.0%
Thika road	120	82.7%	9.2%	91	80.1%	6.7%
Kilimani	121	85.4%	9.1%	102	83.2%	7.9%
Limuru Road	113	77.5%	7.8%
Mombasa road	112	70.0%	7.4%	82	72.7%	6.4%
Eastlands	92	72.5%	6.4%
Average	116	80.0%	8.6%	102	79.3%	7.6%

Source: Cytonn Research

1. Residential Space

In 2025, residential units within MUDs recorded an average rental yield of 7.2%, marking a 1.7% higher compared to the single-use residential market average of 5.5%. This was 0.2% points lower than 2024 performance of 7.4%. The decrease performance was primarily influenced by a decrease in asking rents to Kshs 1,082 per SQM from Kshs 1775 per SQM in 2024. Additionally, there was a decrease in unit uptakes by 4.5% to 13.0% from 17.5%. This reduction in performance can be attributed to harsh economic conditions which reduced the household purchasing power due to high cost of living forcing landlords to lower rents and slow intake of residential units.

Regarding sub-market performance, Westlands and Limuru Road emerged as the top-performing nodes with an average rental yield of 9.1% and 7.9%, respectively, attributed to; i) improved infrastructure easing access to these nodes, ii) availability of amenities enhancing desirability of apartments in the nodes, presence of tenants willing to pay premium rents, and, iii) presence of upscale developments commanding higher rental rates. Conversely, Mombasa Road ranked as the least performing node, registering an average rental yield of 5.3%, mainly due to the lower prices and rental rates associated with developments within the specific area. The table below summarizes the performance of residential spaces in MUDs against the single-themed market in 2025:

All Values are in Kshs Unless Stated Otherwise
Cytonn Report: Performance of Residential Units in MUDs Vs. Market Performance 2025
Location	MUD Performace				Market Performance
	Price/SQM	Rent/SQM	Annual Uptake	Rental Yield %	Price/SQM	Rent/SQM	Annual Uptake	Rental Yield %
Westlands	287,314	1,558	8.5%	9.1%	164,593	749	9.7%	5.5%
Limuru Road	180,396	1,314	23.1%	7.9%	113,234	549	10.5%	5.3%
Mombasa Road	427,404	693	8.6%	6.5%	81,629	444	9.7%	5.6%
Thika Road	145,260	766	11.7%	5.3%	85,547	485	8.9%	5.6%
Average	260,093	1,082	13.0%	7.2%	111,251	557	9.7%	5.5%

Source: Cytonn Research

Section III:  Mixed-Use Developments Investment Opportunity and Outlook

The table below summarizes our outlook on Mixed-Use Developments (MUDs), where we look at the general performance of the key sectors that compose MUDs i.e., retail, commercial office, and residential, and investment opportunities that lie in the themes;

		Cytonn Report: Mixed-Use Developments (MUDs) Outlook
Sector		2025 Sentiment and Outlook	2025 Outlook
Retail	•        The average rental yield of retail spaces in Mixed-Use Developments came in at 10.5% in 2025, 2.2% points higher than single-use retail developments that realized an average rental yield of 8.3%. This was mainly attributable to the high rental rates that MUDs generated at Kshs 223 per SQFT when compared to the Kshs 200 per SQFT recorded for the single-use retail spaces owing to the availability of prime quality spaces attracting higher rental rates.  •        We expect retail spaces within MUDs to continue performing strongly, bolstered by the aggressive expansion of both local and international retailers—including Carrefour and China Square—as they seek to entrench market dominance and fill the void left by outgoing brands such as Nakumatt and Uchumi. This momentum is further supported by Kenya’s favourable population demographics, which continue to drive demand for goods and services, as well as rising foreign capital inflows into the retail sector alongside steady growth in e-commerce. •        However, the retail market in the Nairobi Metropolitan Area faces constraints due to an existing oversupply of more than 3.0 mn SQFT, challenging economic conditions like inflation that reduce consumer purchasing power, and a continued shift toward e-commerce. These factors are likely to dampen the sector's performance. •        Investment opportunities lie in Limuru Road, Karen, and Eastlands, with the nodes providing relatively higher rental yields		Neutral
Office	•        The average rental yield for commercial office spaces in MUDs came in at 8.6%, 1.0% points higher than single-use commercial developments which realized an average rental yield of 7.6% in 2025. The performance by MUDs was largely attributed to the high rental rates chargeable per SQM within the developments driven by; i) Strategic locations attracting multinationals and international organizations, boosting demand for these spaces, and, ii) High rental rates for prime Grade A offices are driven by their exceptional quality, and sustainability features. •        A gradual increase in the uptake of commercial office spaces is expected, supported by the rising popularity of co-working environments. However, overall sector performance will continue to face pressure from the existing oversupply of approximately 5.7 mn SQFT. Encouragingly, the number of new projects in the pipeline has declined compared to the previous year, which may help ease the oversupply in the medium term. •        Westlands, Upperhill, and Karen provide the best investment opportunities owing to their relatively higher rental yields resulting from higher rates chargeable due to the superiority in quality of spaces in the areas in comparison to other nodes		Neutral
Residential	•        residential units within MUDs recorded an average rental yield of 7.2%, marking a 1.7% higher compared to the single-use residential market average of 5.5%. This was 0.2% points lower than 2024 performance of 7.4%. The decrease performance was primarily influenced by a decrease in asking rents to Kshs 1,082 per SQM from Kshs 1775 per SQM in 2024. Additionally, there was a decrease in unit uptakes by 4.5% to 13.0% from 17.5%. This reduction in performance can be attributed to harsh economic conditions which reduced the household purchasing power due to high cost of living forcing landlords to lower rents and slow intake of residential units. •        The best investment opportunity lies in Limuru Road and Westlands, which recorded the highest rental yields, above the market average		Neutral
Outlook	Given that all our metrics are neutral, we retain a NEUTRAL outlook for Mixed-Use Developments (MUDs), supported by the remarkable returns compared to single-use themes, changing client preferences, and MUDs attractiveness driven by the diversity in amenities and social offerings they provide to clients. However, the existing oversupply of the NMA office market at 5.7 mn SQFT, and 3.0 mn SQFT in the NMA retail market, is expected to weigh down the performance. Karen, Kilimani, and Westlands nodes provide the best investment opportunities, with the areas providing the highest average MUD yields of 10.7%, and 9.6% respectively, compared to the market average of 9.1%.

Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication, which is in compliance with Section 2 of the Capital Markets Authority Act Cap 485A, is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor