New office space requirements in Africa up 29% in Q2 2021
New office space requirements across Africa increased by 29 percent in the second quarter of 2021 compared to the first quarter according to Knight Frank, a real estate consultancy firm indicating a return to business confidence across the continent.
According to the firm, the increased office market activity was attributed to the ‘flight to quality’ trend that has seen businesses taking advantage of weakened prime office rents to occupy office spaces that place employee wellbeing at the forefront as well as improving economic outlook across most of the countries.
Data from the firm indicates that new office space requirements were dominated by five sectors that accounted for almost 80 percent of new office space requirements including Professional Services at 29 percent, Industrial & Logistics at 16 percent, Financial Services at 14 percent, Healthcare 12 percent while Non-governmental Organizations (NGOs) represented 8 percent.
Tilda Mwai a Senior Researcher at Knight Frank Africa said demand for quality spaces provides an opportunity for landlords with slightly older buildings to compete in the market should they refurbish their properties to new and modern standards.
“The overarching trend across Africa’s office market is the continued flight to quality. Occupiers remain focused on occupying best-in-class offices that offer greater flexibility around lease terms. The desire to occupy the best office buildings is driving up tenant release space in some cities’ Grade B buildings, which is likely to fuel greater disparity between the performance of Grade A and Grade B office rents.” she said.
In addition, businesses that had previously put office requirements on hold due to the COVID-19 pandemic are also reactivating their searches.
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In a bid to attract and retain tenants, landlords are also becoming more flexible by giving discounted rents and lease concessions including increased rent-free periods.
Across the 28 African cities Knight Frank monitors, 16 of the cities reported rental stability during the review period as prime headline office rents remained relatively resilient.
In Nairobi, prime office rents dropped marginally by one percent quarter on quarter due to lockdown restrictions.
Western Cape and Gauteng in South Africa continue to see increased vacancy rates and downward pressure on prime rents while Nigeria recorded increased occupier activity in the market driven by office relocations from the CBD to the suburbs.
KnightFrank, however, anticipates an increase in demand for offices later in the year in Nairobi owing to the gradual return in business confidence.
Neighboring Tanzania’s occupier activity is also expected to recover due to renewed investor confidence fueled by the new leadership.
Data from the countries that Knight Frank operates in including Kenya, Uganda, Nigeria, Tanzania, Zambia, Zimbabwe, Malawi, Botswana and South Africa indicates varied market performance.