This archive report was first published on 28 September 2021.
As the continent continues to recover from the pandemic, Africa's office market is experiencing a surge in demand for new office space. According to Knight Frank, new office space requirements increased by 29 percent in Q2 2021 compared to Q1 across Africa.
This growth can be attributed to the 'flight to quality' trend, where businesses are prioritizing employee wellbeing and taking advantage of weakened prime office rents to occupy high-quality office spaces. The improved economic outlook across most of the countries has also contributed to this trend.
Professional services, industrial and logistics, financial services, healthcare, and NGOs dominated new office space requirements across Africa in Q2, accounting for almost 80 percent of new office space requirements. This indicates a return in business confidence in these sectors.
Businesses that had previously put office requirements on hold due to the pandemic are now reactivating their searches, with landlords becoming more flexible by offering discounted rents and lease concessions. This flexibility is driving up tenant release space in some cities' Grade B buildings, which may fuel greater disparity between Grade A and Grade B office rents.
However, this presents an opportunity for landlords of slightly older buildings to refurbish and compete effectively for tenants looking for high-quality offices. Tilda Mwai, Senior Researcher at Knight Frank Africa, notes that the 'overarching trend across Africa's office market is the continued flight to quality.'
Prime headline office rents remained relatively resilient across the 28 African cities monitored by Knight Frank, with 16 out of 28 cities experiencing rental stability during the review period. However, market performance continues to vary based on the country.
In Nairobi, prime office rents dropped marginally by one percent q-o-q due to lockdown restrictions imposed at the onset of Q2 2021. In South Africa, markets such as Western Cape and Gauteng continue to see increased vacancy rates and downward pressure on prime rents, prompting landlords to offer incentives and discounts.
Nigeria recorded increased occupier activity in the market driven by office relocations from the CBD to the suburbs, while Tanzania is expected to recover underpinned by renewed investor confidence fuelled by the new leadership.
Nairobi has seen a gradual return in business confidence, reflected by the increased number of business entities registered. According to the Registrar of Companies, there was a 25 percent month-on-month change in July 2021, with 8,483 companies registered compared to 6,786 in June 2021. Knight Frank anticipates this will result in increased demand for offices later in the year.
