In the light of wider macro-economic challenges, corporate occupiers in West Africa remain tightly focused on the optimisation of space and operational cost reductions, according to Nnenna Alintah, Head of Occupier Services for Broll Nigeria. Bennett Oghifo reports
A slight improvement in Nigerian GDP growth, reduced inflation and increased foreign exchange supply in the 3rd quarter of the year are helping the Lagos property market to emerge from a recessionary dip, according to Broll Nigeria in a review of the West African real estate market presented recently.
Broll said, “Five consecutive quarters of negative growth, a building stock supply glut and vacancies ranging from 50% to 76% in prime-grade buildings have created real estate market conditions which may be difficult to shift. While some relief could now be in sight for landlords, the market remains favourable for occupiers.
“In Ghana there has been a steadier improvement in indicators since the beginning of 2017. In fact the IMF expects the Ghanaian economy to grow 5.9% by year-end on the back of daunting commodities challenges.”
Tony Sekyere, Broll Ghana Head of Property Management, stated that aggressive government policies aimed at stimulating the general economy may boost the real estate sector. However, in spite of the emergence of positive economic indices, Sekyere believes that the office market will remain a ‘tenants’ market’ in 2018.
“This is an indication of tenants being thin on the ground,” says Sekyere. “Landlords will thus remain open to flexible lease terms and rental charges.”
For occupiers, attractive incentives such as increased fit-out contributions by landlords, more flexibility in rent payment frequency and a broader range of building amenities will stay on the cards for the foreseeable future. “Occupiers will continue to be discerning in their real estate decisions in order to ensure their bottom-line costs are well managed,” adds Nnenna Alintah, Head of Occupier Services for Broll Nigeria.
“That being said, the outlook for developers and investors may include a slight uptick in transaction activity in 2018 if economies record continuing growth. And with the vast majority of B-grade stock being sub-standard and low in amenities, there is scope for the redevelopment of existing stock.
“With a reduction in take-up from the oil and gas sector, demand drivers have emerged in the financial and technology sectors in the last three years.”
Now, Alintah said, the market will need to be scrutinised to find which industries will drive demand in the next 6 to 12 years.
“Mixed-use buildings and the creation of greener working spaces may become integral to occupier space. The conversion of lettable space for complementary uses could also form part of a refreshed real estate dynamic.
“Unless the current demand base widens, tenants will continue to dictate rental levels,” concludes Sekyere.