Project Appraisal Practices and Performance of Commercial Office Space Projects in Nairobi County, Kenya

Abstract

The purpose of conducting project appraisal in commercial office space projects is to determine its viability and compatibility regarding the financial, economic, market, and technical aspects. Commercial office projects contribute immensely to economic growth in Kenya. However, their performance has been affected by oversupply hence experiencing reduced occupancy and rental rates. The study iinvestigated the influence of project appraisal practices on performance of commercial office space projects in Nairobi City County, Kenya. The study was guided by four objectives: to examine the influence of financial appraisal, economic appraisal, market appraisal, and technical analysis on performance of commercial office space projects. The study used a descriptive survey design to collect qualitative data using structured questionnaires and an interview guide. The target population was 344 registered estate agents operating in Nairobi County, of which 184 respondents were randomly selected to form the sample size. Face-to-face interviews were carried out with six key informants, experienced estate agents, to obtain detailed qualitative responses to the study objectives. Descriptive statistics revealed that financial appraisal and market appraisal had the highest influence on the performance of the dependent variable, whereas economic and technical analysis had the least influence. However, Spearman’s Rank Order correlation analysis revealed that technical and economic appraisals had a positive and strong association at r =0.852 and r = 0.849, respectively, with the dependent variable. Interestingly, financial (r = 0.726) and market appraisal (r = 0.727) were the least correlated. From the findings, we can thus conclude that the four types of project appraisals are statistically significant, to some extent, on performance of commercial office projects in Nairobi County. The study recommends that project analysts consider all types of appraisals but pay more attention to technical and economic appraisals since they are highly correlated to the dependent variable. further studies should be conducted on the same topic once the property market has fully recovered from the effects of the Covid-19 pandemic.