Nairobi is among African cities benefitting from a growing demand of office space as multinational companies renew their interest in the continent with multibillion dollar projects.
The occupancy rate in Grade A offices in Westlands area of Nairobi for instance has slightly increased to around 74 per cent in the first quarter of 2023, up from 72.8 per cent in first quarter of last year.
The United States of America, UK, South Korea, UAE, Saudi Arabia, Turkey and China have a renewed interest in Africa. The UK has committed to investing USD2 billion in sustainable projects across the continent, while the US has pledged an initial USD200 billion for its partnerships for global infrastructure initiatives.
“These efforts are expected to trigger an influx of multinational corporations into major hub cities, including Lagos, Nairobi, Cairo, Johannesburg, and Accra, leading to a surge in demand, particularly for Grade A offices,” notes Knight Frank in First Quarter 2023 Report dubbed Africa Offices Market Dashboard.
“Consequently, the office market in these cities is witnessing a recovery, with Grade A offices registering lower average vacancy levels of around 20 per cent
In Kenya, the report notes that the average monthly prime rents have stabilised at US$13 psm, attributed to the completion of high-quality office developments and the increasing demand for premium properties.
Westlands area has become the most popular office location in Nairobi due to its substantial share of grade-A commercial office space compared to competing nodes like Upperhill, Kilimani, and Mombasa Road.
Investors have been showing a growing preference for rent payments in U.S. dollars due to the ongoing depreciation of the Kenyan Shilling. Currently, 1 USD is equivalent to Sh129.3, marking a significant decrease compared to the average exchange rate of Sh103.4 in 2017.
UGANDA
In Kampala, requirements for prime office space have remained stable, supported by steady demand from professional services, IT, Oil and Gas, and NGOs. On a quarterly basis, average rents remained relatively steady, with occupancies recording a slight increase, especially for the Grade AB office space. Occupiers are opting for space options with competitive rental rates.
This trend is expected to persist, fuelled by growing business confidence and an improved economic outlook. In the prime market, Net Zero initiatives, Environmental, Social and Governance (ESG) standards, flexible office solutions, and coworking models increasingly impact office choices, particularly for multinational companies. The preference for high-quality offices is expected to persist, despite current limited supply. Construction pipeline activities remain high, with approximately 150,000 square meters of office space expected in the next 24 months.
TANZANIA
Tanzania has witnessed a substantial fall in office rents in recent history, with rates dropping from USD 20 per sqm per month in 2015 to USD 15 in 2023, a notable 20 per cent decline. This trend has been attributed to the change of government policies in 2016 where it was required for all government offices to relocate their headquarters to Dodoma (being the Capital of Tanzania) – which resulted in an oversupply of offices in the Dar es Salaam office market, resulting in vacancy rates rising to a staggering 50 per cent.
However, based on the improved economic conditions in the country Knight Frank predicts that Tanzania’s office sector will witness a recovery in 2023. “The country’s inflation rate began to move in the right direction, declining from 4.9 per cent in November to 4.8 per cent in December 2022, indicating a slower pace in the increase of consumer prices.”
“The new regime in Tanzania has also undertaken several initiatives to strengthen its economy, including bolstering its tourism sector and enhancing its trade ties with its African, European, Asian, and American trade partners.”
Johannesburg
The Johannesburg office rental market remains under pressure, with monthly rental rates remaining stagnant at US$ 12.44 psm. Landlords are actively competing to attract new tenants, often offering generous relocation/renewal incentives to new tenants and existing tenants.
“One sector of the office market performing well is the serviced office industry, which caters to new start-ups and small to medium businesses by offering flexible leases and plug-and-play environments.”
NIGERIA
The popularity of co working spaces that prioritise amenities and cultivate a sense of community and collaboration continues to rise in Lagos. This trend is attributed to the increasing demand for flexible and cost-effective alternatives to traditional office spaces, evidenced by the recent rollout of some notable of coworking centres.
ZAMBIA
Since the beginning of the year, there has been a noticeable uptick in activity within the Zambian Office Market.
The demand for small-sized office units ranging from 100-350 sqm has increased significantly, driven by both local and global occupiers. Of particular interest are Grade A offices, with a rising trend towards fully furnished and serviced offices in Lusaka. Notwithstanding the existing excess supply in the market, it is expected that this subsector will experience swift uptake this year, owing in part to the comparatively growing economic activity in the nation.
ZIMBABWE
In Harare, there has been an increase in demand for small-sized offices in recent months. As a result, property developers are adapting or repurposing their buildings to accommodate small and medium-sized enterprises.