Talents driving new office space demand in Nigeria, other cities

A growing war for talent is emerging in Africa as the professional services sector and tech companies expand their African footprint, Knight Frank new report said.

Indeed, of the 297,000 square feet of new requirements registered in the third quarter (Q3), the professional services sector accounted for the lion’s share (30 per cent), with financial services following closely at 22per cent.

“The issue of the war for talent is already hitting the global headlines and this is something we feel will have a significant impact on occupier behaviour in Africa as well,” according to Senior Analyst for Africa, Tilda Mwai

“The space businesses occupy now sends a strong signal to potential employees about the culture of a business and importance it places on the wellbeing of its staff, which is why occupiers are actively seeking buildings that offer more than just space.”

“This is fuelling the flight to quality trend, driving a greater divergence in the performance of Grade A and Grade B office rents. Indeed, Grade B / poorer quality offices are likely to face rising voids and even potential obsolescence as businesses begin to encourage staff back into offices and focus on the very best office buildings,” Mwai said.

The growing tech sector, in particular, remains a core piece of the demand equation. Indeed, key markets such as Nigeria, Kenya, South Africa, Egypt have recorded increased tech activity against the backdrop of market entry by tech giants such as Microsoft and Amazon.

For instance, the number of fintech start-ups in Nigeria, grew by 43 per cent year-over-year (YOY) in H1 2021, making Nigeria the second largest fintech market on the continent after South Africa.

This suggests that not only is new office space demand being created, but it is set to remain strong. The supply pipeline of Grade A stock meanwhile, remains weak, hinting at a continued period of rent increases.

Overall, across the 29 cities tracked by Knight Frank’s composite index, prime rents remain stable in the majority (75 per cent) of the cities buoyed by improving economic conditions in these cities.

Nairobi has emerged as the best performer, recording a 9per cent increase in prime rents during the period under review. This was closely followed by Kampala (7 per cent) and Dakar (4per cent). Lagos remains the most expensive city at $62.5 per square meter (psm) and Harare is the least expensive at $7psm.

He explained, Head, Occupier Services and Commercial Agency (OSCA), Africa, Anthony Havelock, said, while rents had remained stable, this had in part been driven by landlord’s needs to boost their rental income in some of the cities, offering lease concessions such as discounts on rents, free fit-outs and increasing rent-free periods in some instances.

“However, the easing of lockdown restrictions is driving active demand, especially from the professional services and tech sectors. As such we expect the office market to bounce back to pre-pandemic levels by mid-2022.

The Associate Partner at Knight Frank Nigeria, and expert valuation on plants, machinery and equipment, Bello Yekini, also shared his insight from his experience of evaluating factories, equipment and large machinery in Nigeria and West Africa.

He stated that almost all factories, industrial plants and large machinery companies that had employed valuation services also had administrative office spaces, this insight validates the fact that for every corporate organisation occupying a property for agriculture, manufacturing and others, there is definitely an administrative unit with a demand for business space.

Putting into consideration the increase in agro investment companies in Nigeria and West Africa, most of which are tech companies using business spaces and partnering with agricultural and manufacturing companies, “we can with certainty reaffirm the increase in demand for office spaces, as entrepreneurship increases, large companies outsource services to smaller organisations and tech investors increase in the country and across West Africa.”