For the first time since 2014 Nigeria’s grade-A office reported the largest take-up of about
20,100m² in 2019 on the back of increased demand from tech and oil & gas industries, data from
Nigeria’s Office Market Viewpoint H2:2019 by Broll Nigeria shows.
While the bulk of the grade-A office space was delivered in the first half of 2019, around 45,
000m² of office properties entered into the A-grade market last year. The most noteworthy of the
major transactions that occurred in the year under review was the sale of the Cornerstone Tower
Development (GLA of 12,040m²) in the second half of last year.
“The bulk of concluded transactions were driven by the tech and oil & gas industries. The level
of enquiries in the second half of 2019 remained generally unchanged relative to the first half of
the year,” Broll Nigeria said.
Apart from the oil & gas and tech industries which dominated the sectors that enquired about the
grade –A office properties, industries such as business services, diplomatic institutions and
media were also mentioned on the list.
While the last-minute transactions that were concluded towards the end of 2019 were added to
the total number of square meters leased in the review year, Broll stated that about 20 percent of
the take-up comprised of the expansion of existing tenants within their current buildings of
occupation.
Vacancy levels, however, have declined on average following the take-up in new buildings.
Vacancy levels in Ikoyi have declined to 25 percent, while remaining unchanged at an average of
57 percent in Victoria Island as at the end of 2019, the result of Broll’s survey shows.
A grade –A office is the kind of commercial property that represents the newest and highest
quality building in their market. They are generally the best looking buildings with the best
construction and possess high-quality building infrastructure. Grade-A offices are also well
located, have good access, and are professionally managed. As a result of this, they attract the
highest quality tenants and also command the highest rents.
According to the survey by Broll Nigeria, the standard transaction timelines, from initial search
to lease execution, ranged from 12 to 18 months with some transaction taking longer to
conclude.
Although, the report also stated that “some of the completed transactions recorded in the second
half of the year, were remarkably faster to finalize.”
Analysis of the report by Broll revealed that occupier requirements remained fairly unchanged in
the market with the top factors driving building selection (outside of costs) being location,
security, building efficiency, Health, Safety & Environment (HSE) features, and onsite
amenities.
“The nature of transactions closed in 2019 was a hybrid of large space requirements of over
2,000m² to smaller requirements of about 250 to 500 m²,” the report read stating that the
expected deliveries in the market total 130,000m² and include developments such as Trinity
Tower and Famfa Oil Tower.
Broll expects 20 percent of grade-A office property to be delivered in the first half of 2020 and
they also include GLA of the Eco Bank Waves project, which began construction activity in the
second half of 2019 following some period of inactivity.
“Although there has been a decline in the total vacancy in A-grade facilities in the market,
Landlords still view the market as a tenants’ market. Competitive leasing terms are still being
offered on a case-by-case basis conditional on the impact of the prospective tenant on existing
tenant mix and the size of take-up,” Broll said.
Further analysis of the report revealed that asking rents have generally remained unchanged in
the market, however, as a result of Broll’s categorization of A-grade buildings in Victoria Island,
whereby some older buildings have been downgraded, rents appear to be slightly higher in VI
while rents in Ikoyi have remained steady at $700/m²/annum, and average rents in VI was put at
$698/m²/annum.
On the outlook for grade-A office apartments, Broll said with no significant movement upwards
in the level of enquiries, it does not expect demand to increase in the near term. On the supply
side, the Lagos-based real estate firm said even though near-term deliveries in the market are
small, it expects the market to feel the real injection of space in the next 8 to 24 months.
“The market is also going to see a less speculative building as investors become more risk-averse
and indigenous developers become more cash flow sensitive. Rents are to trend steady,
conditional on the health of the economy and in turn the real estate market,” Broll said.
With the outlook of the economy mixed, many landlords remain on the fence or cautiously
optimistic about the performance of the real estate market in 2020 and therefore do not foresee
any real capacity for rental growth in the near term, the report read.
ENDURANCE OKAFOR
