Remote working fails to reduce prime office rents in Nigerian cities
Prime office rents in Nigerian big cities recorded a marginal increase in the first quarter of 2021 (Q1 2021), showing that working from home (WFH) triggered by the COVID-19 pandemic failed to reduce the cost of renting such properties.
The rent increased the most on Aba Road, in Port Harcourt; Yaba, in Lagos, and Wuse Zone 2, in Abuja, according to the latest report on the Nigerian Real Estate Market by Northcourt Real Estate.
Other submarkets where there were increases are Central Business District in Abuja; Ikoyi, Victoria Island and Lekki, in Lagos. Olu Obasanjo Road in Port Harcourt also saw an increase.
The average prime office rent on Aba Road was N15,000 per square in 2021, up from N13,000 per square metre in 2020, representing a 15 percent increase. Similarly, in Yaba, rent rose from N22,000 per square metre in 2020 to N25,000 per square metre in 2021 which is about a 14 percent increase. In Wuze Zone 2, it was N65,000 per square metre in 2021, up from N58,000 per square metre in 2020, representing a 12 percent increase.
Other market nodes in the identified big cities also recorded an increase in rents despite many companies preferring their staff to work from home. For instance, in Lagos, rent was also sticky in Ikeja with average rent up 12 percent between the first half of 2020 and 2021. In 2020 it was N25,000 per square metre, but increased to N28,000 per square metre in 2021.
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The Central Business District in Abuja saw 9 percent rent increase within the period under review as it moved from N52,000 per square metre in 2020 to N62,000 in 2021.
Ikoyi and Victoria Island in Lagos, which are home to over 70 percent of the estimated 1.4 million square meters of total office stock in Nigeria, recorded a low increase in rent. Both had a 4 percent increase apiece.
While rent increased from N169,000 per square metre in 2020 to N176,000 in 2021 in Ikoyi, the increase in Victoria Island was from N175,000 in 2020 to N182,000 per square metre in 2021. Lekki, another island location in the city, recorded a higher rent increase at 6 percent.
These statistics, as contained in the Nigerian Real Estate Market report by Northcourt Real Estate, show where opportunities exist for investors who have not just patient capital, but also a long-term view of the market.
“Developments have begun to progress beyond pre-pandemic levels, except where fused into a mixed-use development, in which case development has been more accelerated,” Tayo Odunsi, Northcourt CEO, noted.
Besides Purple Capital and Agility which are bullish with mixed-use developments despite the pandemic, there are also pockets of developers who are doing developments, intent on tapping into the opportunities offered by the emerging hybrid workplace experience.
Gapstone Developers Limited, one of such developers, is building one-of-a-kind mixed-use facility known as Zirconia Heights. This is a 10-floor mixed-use development that promises a total of 62-unit apartments comprising 1, 2 and 3-bedroom apartments.
“The development also has both office and retail components, each designed specifically with specialised amenities to serve residential and commercial needs. There are also fibre optic internet, CCTV and automatic car access,” Adetoro Bank-Omotoye, the firm’s managing director, explained.
Odunsi noted that the increase in WFH technology has contributed to changes in residential demand, rents, and the repurposing of office space, adding that high skilled knowledge workers operating from their homes survived the hardest points of the pandemic.
According to him, post-COVID
projections are that private offices would see the highest demand, followed by open-plan space types with everyone having their own space. “The amount of floor space per user will be higher as COVID-19 safety protocols are likely to continue into mid-2022,” he reasoned, pointing out that businesses would need to redefine the amount of space new-normal occupiers would require.
“Co-working operators have been one of the acquirers of vacant office space globally. How often (and how many) employees will work from home, will also influence the changes in demand for individual offices and consequently, entire buildings,” he said.
Landlords, he noted, were further along on modernising their assets by setting up infrared checkpoints, installing anti-viral surface coatings, health and wellness features and full COVID-19 access protocols.
“While these are expensive range of activities, they are, however, non-negotiable requirements to international occupiers.
It is expected that companies will prefer to rent serviced offices to the classic open-plan co-working space as a cost-efficient strategy while enhancing employee productivity,” Odunsi said.