The property market in Nigeria will in 2016 receive about 52,000 square metres of prime office space though the market ended 2015 on a negative note with over-supply, leading to a rent slide as high as 13 percent to $750 per square metre , down from over $1,000 per square metre in some locations.
Market watchers say prime rents in Victoria Island will continue trending downwards over the next 12 months and will stabilise at about $700 per square metre. They further observe that at present, deals in this location are closing in the $700 per square metre to $750 per square metre range, while Ikoyi is expected to bottom out at below $900 per square metre.
According to the market watchers, with weak economic conditions likely to persist in 2016, landlords are seen becoming increasingly agree-able to lower rents in order to secure good tenants.
Generally, the prime office market which was projected to receive 65,000 square metres space in 2015 was heavily impacted by the economic slowdown and political uncertainty in the country and these played major roles in reducing demand for prime offices.
Demand for the prime office market in Nigeria is driven by three major sectors including telecoms, financial, and oil and gas with oil and gas leading up-take, due to theie deep pockets.
The downturn in the international oil market has however changed all these and as Femi Akintunde, MD/CEO, AMFacilities Limited, explained to BusinessDay, many of the oil industry workers have been laid off, while some of the expatriate staff have returned to their home countries.
Udo Okonjo, the CEO/vice chair, Fine and Country (WA) International, notes that “the market situation in the out-going year was such that the concept of location, quality and good value played a major role in the decision of many corporate tenants, following the near-stagnant economy for the best part of the year, and the subsequent slide of oil prices, along with unclear economic policies from a still settling government”.
Cluttons Nigeria, a relatively new real estate services provider, notes in its recent report on the prime office market, that in Lagos particularly, the development in the oil market has resulted in the return of a number of office spaces to the market, with Ikoyi and Victoria Island seeing a particularly sharp increase in the amount of spaces available to sublet.
“As we previously forecast, this coupled with the high volume of space that has been completed this year, has put rents under pressure across the board. In fact, Victoria Island has led the rent declines recorded across the city during the first three quarters, with rents slipping by almost 13 percent to $750 per square metre”, Erejuwa Gbadebo, the company’s CEO, explained to BusinessDay.
“Ikoyi was the next weakest performing market, with rents dipping by 3.3 percent to $880 per square metre over the same period”,
Gbadebo added, noting that aside from the oil sector, the financial and telecommunications sectors have led the demand for prime office space in the out-going year.
This substantial additional supply is expected from the completion of Temple Tower, which is to deliver 15,000 square metres and Heritage Place, 15,600 square metres, both in Ikoyi and Nest Oil Tower which holds promise for 9,904 square metres in Victoria Island.
With this increasing supply across Ikoyi and Victoria Island, Gbadebo said there would inevitably be further downward pressure on rents, noting that the market in these locations was transiting into a tenant’s market and marking a significant change.
“Not surprisingly, landlords are increasingly becoming more flexible with payment terms, lease lengths and rent-free periods. Despite the overall weakness in the market however, landlords prefer attracting blue chip businesses”, she said.
