In spite of the ravaging impact of economic recession, the Nigerian commercial office space segment of the property market remains upbeat with many Grade A office buildings coming to the market and many others in various stages of construction and completion.
Ikoyi and Victoria Island are the most active sub-markets for institutional Grade A supply in Lagos. New developments, currently leasing or due to be delivered in 2017, include The Wings Towers, which is now in the market offering 27,500 square metres; Nestoil Tower, 7,500 square metres; Madina Tower, 8,300 square metres, and Civic Centre Towers, 8,096 square metres, all in Victoria Island.
In Ikoyi, particularly on Kingsway Road, there is a good number of them, including The Heritage Place, which is already in the market with 15,631 square metres, and Alliance Place still under construction with a promise to deliver 6,670 square metres. Others are the Kingsway Tower, 12,000 square metres; Temple Tower, 14,000 square metres; BAT’s Rising Sun, 10,000 square metres, and Lake Point Towers, 13,400 square metres.
Before now, Ikoyi was known for its residential buildings with their Victorian architecture, but changing business dynamics have altered all that.
“There is nothing strange or particularly wonderful about what is happening in Ikoyi; what that simply tells you is that Kingsway road is today the most desirable, most sought after office space address in Lagos,” Obi Nwogugu, head, African Capital Alliance Property Investment Company, explained to BusinessDay.
“We have seen some interesting developments on Ozumba Mbadiwe Street in Victoria Island, but Kingsway is the preferred destination,” he said.
Grade A office buildings are always targeted by international oil companies (IOCs), institutional investors and corporate clients who can afford the rents or the lease amounts charged per square metre and, in some cases, in dollars making them products for a narrow market.
The challenges in economy and the drastic fall in the oil prices in the international market have had the combined effect of slowing business, lowering productive activities and also reducing demand for such space, especially at the size and price they are delivered to the market, leading to competition by developers and landlords to attract potential tenants.
“Yes, we have seen some competition in the market and that has, increasingly, brought some efficiency into construction; build quality is the in-thing now and a lot is being done to ensure product differentiation,” a developer, who did not want to be named, told BusinessDay in an interview.
He stressed that more money was being put back into the buyer’s pocket, even as he enjoyed enhanced asset quality and value.
The market is no longer what it used to be as average asking rents for these developments are now on the downward trend in Ikoyi, averaging $600 – $850 per square metre per annum, which is about 2 percent lower than second quarter 2016 rates. Achievable rents are 8 percent to 15 percent below asking rents.
Average asking rents in Victoria Island follows Ikoyi trend, easing by 6 percent to $780 per square metre per annum. Achievable rents are 10 percent to 20 percent below asking rents.
This situation may worsen as it is expected that, over the next 12 to 24 months, approximately 98,960 square metres of office space is expected to come into the market with 63,640 square metres of that space intended to have been added to the market by fourth quarter 2016.
Because of these challenges, developers are offering interesting concessions to woo tenants. These range from reduction in lease period, rent holiday and payment of naira equivalent of dollar-denominated rents, to energy efficiency, which cuts down on energy cost.
The Heritage Place, which is Nigeria’s first green building, is a typical example of this. Leadership in Energy and Environmental Design (LEED) certifies the 14-floor office building, and it is designed to achieve, at least, 20 percent more energy savings than a comparable building in Nigeria.
CHUKA UROKO
