Property market anticipates slide in office space prices in 18 months

Expectation is high in the property market that in the next 12 to 18 months when a good number of pipeline prime office space projects would have been completed, competition for tenants will be keen, leading to downward adjustment of rental prices.

Rising demand has prompted a surge in the development of top quality office buildings, some of which will be completed by the end of this year. These include the Rose of Sharon Tower, NIPOST Tower, Kanti Tower, etc in Lagos. These will be bringing about

56,000 square metres of rental space to the market.

Presently, prime office space prices are quite high, attracting $1,000 and above per square metre, in  high-brow neighbourhoods, especially the central business district (CBD) of Victoria Island in Lagos.

Gbenga Olaniyan,  Chairman/CEO, Estate Links Limited, confirmed to BusinessDay that 2016 would see many of the pipeline office space projects hitting the market.

Olaniyan adds that competition for tenants would be there, but price adjustment might not be much.

Thus far, investment interest in real estate, especially the commercial segment of the sector remains strong, despite plummeting oil prices which have set the economy and its managers on edge.

In a recent report on the performance of this sector in the third quarter of the year, Broll Property Services quoted the director of the IMF African Department as downplaying fears and assuring investors/stakeholders that the real estate market outlook in Nigeria still appeared “robust” especially because some 50 percent of its GDP was now generated from the services sector.

The report, which focused on the development of office properties in outlying areas outside mature up-market locations, noted however, that the traditional core office markets continue to experience a flurry of activity with various prime developments in Victoria Island nearing completion and entering the market imminently—a development which the report expected would alleviate the current lack of quality office properties in the market.

Bolaji Edun, Broll Nigeria’s CEO, disclosed to BusinessDay that about 6,720 square metres  of office space was transacted on in the last quarter, pointing out that 60 percent  of this space was located in Ikeja, Lagos state, at the new Landmark House, adding that P&G unveiled this location as its new administrative headquarters, along with AC Nielsen, Robert Bosch and Spur, which also took up residence at the Landmark House, giving a boost to the Ikeja office market.

“Another significant transaction which accounted for the remaining 40 percent of transactions in the quarter was the unveiling of the Architects Place in Victoria Island, which already boasts  50 percent occupancy rate, with one of its twin wings fully occupied”, he said in the report released recently.

BusinessDay had earlier reported Munachi Okoye, the CEO of MCO Real Estate Limited, as saying that “the re-basing of Nigeria’s GDP leading to its identification as the largest economy in Africa has put the country on the map as the foremost investment destination for international capital seeking exposure to the African markets, which has led to increased interest from international real estate developers seeking to gain entry to the market”.

Okoye, who spoke in a Q3 report on the real estate market, noted that in the commercial segment of the market, institutional investors’ interest has remained very strong in the office space, retail and the hospitality sectors, adding that prime rents in these sectors were as high as US$1,000 per square metre for commercial office, about US$900 per square metre for retail space, while room rates for prime hotels ranged from $300 to $500 per night.

Businessday