With an average monthly asking price of $12 (Sh1,293) per square metre, Nairobi is among the cities with the cheapest rents for prime offices in Africa.
In the first quarter of 2021, monthly prime office rents for East Africa’s biggest economy remained subdued with recovery far from sight, according to property management firm Knight Frank.
Prime office rents halved in the second half of last year owing to an oversupply worsened by the Covid-19 pandemic, which birthed the work-from-home revolution.
Knight Frank Kenya Head of Agency Anthony Havelock said Nairobi office activities in the first quarter were characterised by consolidation activity by both domestic and international businesses.
The businesses took advantage of the weaker rents by upgrading their offices.
“Having started positively, the Nairobi office market performance once again has been largely subdued owing to the lockdown restrictions imposed towards the end of quarter one, which impacted negatively on market activity,” he said.
“There remains an oversupply of commercial space in most districts across the city, which together with the slowly recovering economy and working from home dynamic has given occupiers the upper hand in lease term negotiations and forced landlords and developers to be more flexible.”
He noted that market activity was increasing owing to multinational occupiers looking to re-occupy their spaces as the global Covid-19 vaccination rate rose.
West African countries had some of the highest monthly asking rents for prime offices, according to Knight Frank’s 28-city composite index, which monitors office rental performance in prominent African cities.
Lagos – Nigeria’s commercial capital and Africa’s most populous city – had the highest asking rents at $62.50 (Sh6,737) per square metre.
The city posted the highest increase in prime monthly rent of 20 per cent, attributed to pent-up demand as Nigeria recovered from a recession in the last quarter of 2020.
“Overall, increased activity in Lagos’ prime office market is expected to continue, driven in particular by the growing start-up environment, the agricultural sector which is often linked with a rise in office take-up by consultancies, as well as multinational corporations,” said the Africa Office Market Dashboard for Q1 2021.
Lagos recently overtook Nairobi as Africa’s top start-up ecosystem and is booming as the continent’s technology hub, according to the Global Startup Ecosystem Index 2021.
In Angola’s capital, Luanda, the asking monthly price for prime office spaces was $55 (Sh5,928) per square metre. Kinshasa, DRC’s capital and largest city, had prime rents at $35 (Sh3,772).
Ivory Coast’s economic capital Abidjan, popular as the ‘Paris of West Africa’, charged $32.50 (Sh3,503) per square metre for prime office spaces.
In East Africa, Ethiopia’s Addis Ababa topped the monthly prime rents with $16 (Sh1,724), followed by Kampala $15.25 (Sh1,643) and Dar $13.45 (Sh1,449) per square metre.
The cheapest rents were in Zimbabwe’s Harare at $7 (Sh754) per square metre and Malawi’s capital Blantyre at $9.33 (Sh1,005).
In rich cities such as Cape Town and Johannesburg, prime dollar-based rents fell sharply owing to oversupply factors. In Johannesburg, they fell by a record 22 per cent.
“Limited conditions in the prime office market have prevailed, with the pandemic continuing to curtail occupier demand,” Knight Frank said.
“The vast majority of leasing decisions are being deferred as occupiers review occupational strategies with a view to factoring greater remote working going forward.”
The property firm expects rents to remain depressed this year due to an oversupply of office stock, combined with weak economic conditions.
The report released this week says the office market in most locations remains “tenant favourable” due to varying approaches by the continent’s governments to recurring Covid-19 infection occurrences. The overall performance was stable.