The prime office space segment of the real estate market is struggling with shrinking occupancy levels that have left developers rethinking their options.
While some are dropping rent charges and offering stronger value propositions to stimulate demand, others are considering reinventing the buildings with a view to converting them to other uses.
In grade A developments, for instance, some multinationals are renegotiating leases for smaller spaces. Others are completely exiting. Market watchers are worried that transactions are declining as existing facilities are empty or half-occupied with businesses continuing the trend of converting residential apartments to offices.
Many organisations are yet to return fully to physical office operation after the COVID-19 pandemic as they favour the hybrid work. They are reimagining and reviewing their space requirements downwards.
“The office segment of the real estate market is experiencing a difficult time as some building occupancies struggle with dampened economic performance. Unoccupied office buildings are becoming candidates for reinvention by developers struggling to recoup investments,” Tayo Odunsi, an estate surveyor and valuer, confirmed in a recent report on Nigerian real estate market.
Odunsi, who is the chairman, Royal Institute of Chartered Surveyors (RICS), Nigerian Group, noted that Grade B offices – the erstwhile haven for office space renters – are increasingly having to manage rent defaults, pointing out that the exit of multinational companies have not helped in instilling confidence in the office market.
Read also: Rental properties seen dominating real estate market transactions in 2025
Analysts note that this segment of real estate is experiencing part of the symptoms of a slowing economy, recalling the pre-COVID retail office market in Nigeria when investors pushed cash into the market and developed high-rise buildings standing on 12 to 20 and above floors.
Kingsway Road in Ikoyi became another Silicon Valley with such iconic buildings as The Heritage Place, Kingsway Towers, Fanfa Towers, Main One, The Alliance Place, among others.
“That’s the new destination for Grade A office buildings in Lagos; that’s our Silicon Valley,” Obi Nwogwugwu, former head, real estate unit at Africa Capital Alliance, told BusinessDay in an interview, adding that Ozumba Mbadiwe, which is home to The Wings-a twin tower office facility, and The Waves, is another destination.
At this time, this grade of office buildings were renting for upwards of $1000 per square metre. But now, “any prospective tenant with between $800 and $750 can rent a square metre in any of those iconic buildings,” according to Gbenga Olaniyan, chairman, Estate Links Limited.
A combination of economic downturn and the COVID-19 impact has made all the difference. According to the Northcourt report, the transition towards remote work across various sectors has continued, noting, however, that specific industries such as food and beverage, professional services, technology, and e-commerce predominantly drive demand.
Like office market, retail is also experiencing some changes arising from occupancy challenges. There has been a significant shift from formal retail with large lettable spaces to community malls nestled within high density residential areas.
“Retail appears to be entering a less-is-more era, driven by a demand for cost-effective shopping experiences that simplify decision-making. Consumers, overwhelmed by past challenges, now value well-edited selections. This trend prioritises quality and guidance over sheer quantity,” Northcourt report says.
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