A growing war for talent is emerging in Africa as professional services sector and tech companies expand their African footprint according to Knight Frank. Indeed, of the 297,000 sqft of new requirements registered in Q3, the professional services sector accounted for the lion’s share (30 per cent ) with financial services following closely at 22 per cent.
Senior Analyst for Africa, Tilda Mwai, explained, ‘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. The space businesses occupy now sends a strong signal to potential employees about the culture of a business and the 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.’
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 y-o-y 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 majority (75 per cent ) of the cities buoyed by improving economic conditions in these cities. Nairobi has emerged as the best performer, recording a 9 per cent increase in prime rents during the period under review. This was closely followed by Kampala (7%) and Dakar (4%). Lagos remains the most expensive city at USD 62.5 psm and Harare the least expensive at USD 7 psm.
Head of OSCA, Anthony Havelock, Africa said, While rents have remained stable, this has 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.
Associate Partner at Knight Frank Nigeria, Expert Valuation of Plants, Machinery and Equipment, Bello Yekini, also shared his insight from his experience of valuating Factories, equipment and large machinery in Nigeria and West Africa. He states that almost all factories, industrial plants and large machinery companies that have employed our valuation services also have administrative office spaces, this insight validates the fact that for every corporate organization 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 organizations and tech investors increase in the country and across West Africa.
* Report by Knight Frank Nigeria
