In the high-end real estate market, Nigeria has a significant demand challenge. Luxury residential real estate as well as Grade A or prime office buildings are over supplied in the market where demand is subdued.
As a result, both segments have considerable vacancy rate which is, however, higher in grade A office space. This has been impacted by remote work or work from home and hybrid work policy adopted by a good number of companies since the days of Covid pandemic and its social distancing rules.
This development has been worsened by economic slowdown which has compelled many companies to downside their operations, leading to a significant reduction in their space requirements. Worse still, many of the multi-national corporations, especially in the oil and gas sector, have left Nigeria.
Low demand as well as increasing vacancy rate are discouraging new investment in the market to a point where it is reported that in the whole of 2023, there was no record of any ground breaking event to start a new office project. What the market witnessed, instead, was completion of on-going projects.
Whereas landlords of luxury residential buildings are adopting measures such as partitioning of large apartments into smaller family units and allowing apartment sharing, it is not so easy for office space suppliers, hence the growing vacancy rate.
But Canada, the North American country whose housing situation is also dire like Nigeria’s, has evolved a solution to its commercial office vacancy problem. This, experts say, holds lessons for Nigeria, especially in its public office buildings.
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As a result of the work from home policy of the government, Canadian public workers abandoned the big cities and settled in the country’s small cities where they have been breathing life into those areas, creating vacancies in office buildings in the big cities.
But that is no more as the Government of Canada (GoC) has ordered its remote workforce back to the office with effect from yesterday, Monday, September 9. The reasons cited haven’t been particularly strong, but the impact on big cities has been.
“Downtowns have been hollowed out as workers moved to smaller regions and took their spending with them. Now big cities and their leaders have been trying to get workers to go back into the office, for just enough days to prevent them from moving too far out of their pricey regions,” says a report by Better Dwelling.
The report recalls that, back in December 2022, the Treasury Board Secretariat (TBS) announced that public workers will have to be on-site for 2 or 3 days per week, or between 40-60 percent of their regular schedule. This came shortly after business leaders publicly called for an end to work-at-home policies in the Federal Government.
Better Dwelling recalls further that, in May 2024, the TBS rolled out the “prescribed presence” directive for those working in public administration, adding that this requires the public service to work on-site a minimum of 3 days for workers, and four days for executives.
In Nigeria, Benedict Nnaji, an office space agent in Lagos, recalls that pre-Covid pandemic office market in Nigeria witnessed what he said, was clearly a boom with many notable space suppliers moving into the market with high-rise office buildings, many of them rising 12 –20 floors like the Kingsway Towers and Famfa Towers, both located strategically on Kingsway Road, Ikoyi, Lagos.
He noted in a telephone chat with BusinessDay that the impact of Covid, especially the social distancing rules, saw occupier levels in many of these high- rise and even the low-rise office buildings drop significantly along with per square metre rents. “Added to this was the work from home or hybrid work policy adopted by many organizations,” he said.
