Real estate developers in Nigeria are opting for mixed-used properties amid the challenges in the commercial office space market.
The lingering after-effects of the COVID-19 pandemic are influencing investment decisions and choices in the real estate sector across West Africa, particularly in Nigeria.
Experts say mixed-use real estate assets such as Landmark Group’s developments in Nigeria are currently experiencing high footfall and growth in non-rental income with a focus on sponsorships and advertising.
“Developers are making a shift to provide more mixed-use assets,” Tope Runsewe, CEO of Dutum Group, said.
He said aside from the challenges in the market, the shift is also aimed at providing flexibility and maximising space.
From construction perspective, Runsewe, who spoke at this year’s edition of West Africa Property Investment Summit in Lagos, said the demand for space sharing was rising significantly.
Senami Amusu, corporate finance manager at Landmark, said the group’s non-rental income has grown by 76 percent, and it is positioning for a growth of 80 percent.
Amusu said the warehousing and industrial real estate market was experiencing significant growth, with a strong pipeline of warehousing assets, adding that warehouse off-takers were demanding facilities with more technology through racking systems and inventory management.
Runsewe, however, said the demand for grade A office assets is slowing while demand has peaked significantly for grade B office spaces such that the market has seen more enquiries for smaller office spaces and residential conversions than purpose-built office assets.
“Tenants are seeking more flexible assets where there’s a reduced burden of operational costs,” he said.
A major development in this space, according to the experts, is the impact of property technology (Proptech) in transactions. “Proptech has influenced office space search and the flow of information in the real estate market. Asset owners are optimising their assets to ensure spaces are more attractive for off-take,” Krishnan Ranganath, regional executive, West Africa at Africa Data Centre, said.
He added that technology has been useful for access control for office assets, just as it has been useful in construction material procurement and in residential. Certain startups are providing solutions that help flexible monthly payments such as AfricaWorks, which is working on a product that allows much flexibility for its users to access its coworking spaces across Africa.
Globally, both the present and future outlook for the office market is not bright and this has been affirmed by
A new report, ‘Global Real Estate Perspective November 2022’, compiled by Jones Lang LaSale, said the office market is at the mercy of economic headwinds.
According to the report, the economic headwinds have slowed activity in the market, leading to a global 5 percent decline in leasing in the third quarter of 2022. “Occupiers are now starting to have a more cautious approach with lengthening decision-making processes,” the report said.
David Mbah, managing partner at MDS Properties Limited, told BusinessDay that much of the market demand has been for sizes below 200 square metres and for prices between N60,000 and N100,000 per square metre per annum, with most of the leased spaces in the grade C office category.
“Grade A and B offices have remained effective with rent at $350 – $600 per square metre while asking prices are $500 – $800 per square metre. Some of the landlords in the Grade A and B office category are willing to accept the naira equivalents of the rent at the official/CBN exchange rate,” Mbah said.