In the last 18-24 months, massive investment has gone into office space development, leading to the emergence of many office towers, rising floors and occupying several square metres of land at prime locations. Demand for Grade A office space rose significantly within a couple of years ago and as of the second to the third quarter of last year, demand went up by 17 per cent to US$70 per square metre per month, putting Nigeria ahead of peers such as Ghana, Rwanda and Namibia which charged US$37, US$20 and US$18, respectively, for same size space. Market realities arising from the falling oil price in the international market and the devaluation in the local currency have, however, brought uncertainties in the market, compelling investors to plan ahead of imminent demand drop and over-supply.
“What happens when the market does not live up to expectation is that there will be adjustments in all the things that drive the market and that will happen whether this year or next when many of the pipeline projects will be completed”, an investor who did not want to be named, told BusinessDay.
“As supply comes and demand does not meet supply, there will be adjustment”, the investor stressed, adding that “there will be a lot of efforts at product differentiation within the same market; people are going to be a lot more conscious of the quality they put to the market—the energy efficiency and environmental friendliness; a lot of things will come into play to differentiate one product from another including occupational cost”. As a result of this, investors are making conscious efforts in most of the upcoming projects to build-in cost-saving strategies in the architecture of the projects such as energy-saving, environmental friendliness, ample parking spaces, etc all aimed at reducing occupational cost and stimulating demand.
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In Lagos, for instance, in the next 12 to 16 months when a number of the pipeline projects will be completed, the market anticipates over-supply which, Gbenga Olaniyan, the /CEO, of Estate Links Limited, says would lead to “competition for tenants and a price adjustment that might not be much”. Bolaji Edun, Broll Nigeria’s CEO, agrees, noting that the market would be seeing an over-supply, which he affirms, would lead to a downward review of rents and competition for tenants who would be a lot choosier in their transactions.
BusinessDay had earlier reported that in Ikoyi alone, about six new projects, mainly commercial office space, rising 13 to 15 floors with gross buildable areas (GBA) ranging from a minimum of 7,500 square metres to 19,500 square metres have gone off the ground along the Kingsway Road.
Within this location are office space projects at various stages of construction, including Kingsway Towers by Glover Road, a commercial office space development that will rise 15 floors on 15,000 square metres of land, and just close to it is the BAT Rising Sun opposite Ikoyi Club. This is a mixed-use development that sits on 19 square metres, holding promise for 13 floors out of which four will be used for office space. By Lugard and Kingsway Avenue junction is Heritage Place, another commercial development that will rise 14 floors on 15,600 square metres. Eight of the 14 floors will be for office space and the rest for parking while Sogenal Towers, a mixed-use development located beside Mercedes Place occupies 7,500 square metres and will rise 15 floors that will be leased or rented out as commercial office spaces.
