Hotels, developers face drop on State austerity

KICC is likely to gain from the new order to ministries and agencies. FILE PHOTO | NMG 

By DOREEN WAINAINAH
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Summary

• The government directed ministries, agencies and departments (MDAs) to restrict trainings and leases to State-owned institutions and facilities.
• In the memo dated September 2019, the Treasury said that the Housing and Urban Planning should develop standards for office space for public officers and rent payable in zoned locations.
• The National Treasury had announced the government would from July 2019 renegotiate leases and set a standard rate across MDAs.

Hotels and property developers are facing reduced sales after the government directed ministries, agencies and departments (MDAs) to restrict trainings and leases to State-owned institutions and facilities.

In the memo dated September 2019, the Treasury said that the Housing and Urban Planning should develop standards for office space for public officers and rent payable in zoned locations.

“MDAs should first exhaust occupation/lease of office space in government buildings before acquiring space from the market,” reads the memo signed by acting Treasury Cabinet Secretary Ukur Yatani.

This is not the first time the government has issued similar orders to curb expenditure by putting caveats on property leasing.

The National Treasury had announced the government would from July 2019 renegotiate leases and set a standard rate across MDAs.

This was due to the fact that the government has been leasing office space at higher than market rates, resulting in huge costs. This was yet to be effected.

The government further directed that trainings be conducted at its facilities.

“Except for highly specialised courses, all government sponsored trainings should be conducted in the country and in particular by the Kenya School of Government and other government training institutions,” the memo said.

The directive will be a boost to institutions such as the Kenyatta International Convention Centre (KICC) that last year recorded reduced revenues.

However, it is expected to eat into revenues of privately owned hotels. The hospitality sector in Nairobi and Mombasa has been relying on meetings, conferences and trainings for revenues, following travel advisories and terrorism threats.

According to real estate management firm Knight Frank, absorption of Grade A and B office space in Nairobi declined by eight percent in the first half of 2019 compared to the second half of 2018.