Lagos seeing blue-chip demand for turnkey office solutions
Unlike its major commercial counterparts in South Africa, office market performance within Lagos, Nigeria, has remained fairly constant over the past year – with slight improvements in the frequency of enquiries and completed transactions. Notably, landlords are persisting with current market retention strategies such as rent concessions, longer rent-free periods, fit-out contributions, flexibility in frequency of rent payments, etc. In some cases, landlords are offering to fit-out premises for tenants (ex-furniture). According to Jemil Dawodu, Managing Director, CBRE Excellerate Nigeria, this has contributed to a marked rise in demand for more turnkey office options – demand that is being led by blue-chips and large corporates.
Jemil Dawodu, Managing Director, CBRE Excellerate Nigeria |
“This development is largely attributable to preferences by corporates to mitigate initial capital outlay of which fit-out and furniture costs constitute a significant portion, especially in prime grade buildings,” explains Dawodu.
In line with this growing preference among blue-chips and corporates, the Lagosoffice market remains a tenants’ market – with landlords having to offer favourable leasing terms to drive occupancy levels. That said, there are definitive features in the market that drive notable premiums at some buildings such as location, quality of build, amenities, etc.
West Africa’s commercial hub
Lagos is the most populous metropolitan area on the African continent, as well as its second fastest growing city. Without doubt, it is the economic and commercial hub of West Africa. It contributes a whopping 25% of Nigeria’s GDP, and the UN expects that its population will be above 25 million by 2025. Notably, Lagos houses 45% of Nigeria’s skilled labour. It generates the highest internal revenue of all states in Nigeria, and if taken as a country on its own, its 2010 GDP of $80 billion made it the 11th largest economy in Africa!
“It is therefore no surprise then, that Lagos is Nigeria’s financial, commercial and industrial nerve centre…with over 2,000 manufacturing industries and over 200 financial institutions (banks, insurance companies, etc.),” said Dawodu.
Indeed, the State alone harbours 60% of the Federation’s total industrial investments and foreign trade, while also attracting 65% of Nigeria’s commercial activities. The headquarters of multinational conglomerates like UAC, Unilever, John Holts, Leventis, Churchgate, Chevron, Shell, ExxonMobil and the nation’s giant public enterprises are all located within the State.
Oil & Gas sector driving demand
When taking a closer look at demand, the oil and gas sector recorded the highest number of enquiries within the first nine months of the year, which is attributable to the performance of oil in the global and domestic markets.
Other industries that have also contributed to the level of activity include Technology and Finance and Consulting, with space requirements from as low as 200m² to as high as 2,000m², Consulting (200m²–500m²), Private Equity (200m²–250m²), and Technology (500m²–1,500m² +).
In the first half of 2019, demand activity in the A-grade market slowed relative to that of H2:2018, whereby a number of large transactions were concluded towards the end of the year. Enquiries have also been noted to have slowed in H1:2019.
“While these indicators seem negative for the office market, they are not necessarily a massive drawback as further analysis into the transactions closed in H2:2018 reveal once-off transactions in the oil and gas industry in a response to the ramp-up in global oil prices,” explains Dawodu.
Large transactions, such as 10,000m² in a single take-up, were recorded in a market that had mainly witnessed take-up in the 250m²–500m² range.
According to Dawodu, 33,000m² of office space was delivered to the A-grade market in the first half of 2019.
“This has added to a 61% vacancy rate, which is up from an average of 57% as at the end of 2018,” he noted.
Source: bizcommunity.com
