• Wednesday, February 21, 2024
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BusinessDay

Exciting moments for tenants as office space market suffers over-supply

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It is exciting moments for sitting and prospective tenants in the upscale commercial office space markets in Ikoyi and Victoria Island as increasing supply of prime grade products has reduced developers’ asking rent in both markets, a report by Broll Property Services has revealed.

The report obtained by Business Day shows that with the delivery of as many as 30,000 square metres of grade ‘A’ office space into these markets in the first quarter of this year, annual rents of new developments in the Ikoyi axis have dropped by 15 percent.

Precisely, annual rent of new developments in the Ikoyi initially pegged at $1,000 per square metre have been subtly reduced to a more realistic $800 per square metre for the short term, while the Victoria Island market has equally seen its rent stagnate at the latter figure since Q4 2014.

The report further stated that annual rent in other less pricey areas such as Lekki, Lagos Island and Ikeja have stagnated at $240, $187 and $180 respectively per square metre since Q4 2014.

It  points out that with supply expected to peak further owing to the expected delivery of another 40,000 square metres of office space into the market, property owners are  likely to push back on lease terms, rental rates and even introduce more tenant-friendly incentives in a bid to stimulate demand for their developments.

According to the report, the current activity  slowdown in the asset market in the first quarter of the year coupled with the wider  office space options means that tenants are taking sluggish and laid back approach to taking spaces off the market.

In response to this coupled with increased competition and economic challenges, landlords have become more competitive by lowering their asking rental figures, even as it is expected that rental activity will remain upbeat in buildings with competitive rents.

However, despite this slowdown, the report notes that the demand for top grade office space from the financial services sector remained constant as firms in the industry continue to expand or relocate to better quality space.

Additional demand is also noted in the technology sector and shrinking demand from the oil and gas sector continue just as it is anticipated that firms within the industry will consolidate or remain conservative till oil prices firm up.