Knight Frank Records 29% rise in New Office Space Market in 3 months Across Africa

New office space requirements increased by 29% in Second Quarter (Q2) of 2021 compared to Q1 (First Quarter) across Africa according to Knight Frank.

This increased office market activity has been 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.

Across the 28 African cities Knight Frank monitors, prime headline office rents remained relatively resilient with 16 out of the 28 cities tracked experiencing rental stability during the review period. However, market performance continues to vary based on the country.

In Kampala, 4% increase in the number of office space inquiries was recorded in Q2-2021 as compared to Q1-2021 providing confidence in the rate of recovery for the office market. The inquiries were largely from government bodies, financial institutions, consultancies, IT, accounting firms, Oil and Gas affiliated companies, and NGOs who continue to prefer areas in and around Nakasero, Kololo, Nakawa, Naguru, and Bugolobi. This demand for space was further supported by the increase in oil and gas activities which are slowly reviving activity in the various asset classes and sectors of the economy. The positive trend was however affected by the 42 days national lockdown announced on the 18th June 2021, setting back the momentum that had been gained throughout the quarter, thus necessitating a cautious outlook in terms of general office performance

In Nairobi for example, prime office rents dropped marginally by 1% q-o-q due to lockdown restrictions imposed at the onset of Q2 2021. In addition, markets such as Western Cape and Gauteng in South Africa continue to see increased vacancy rates and downward pressure on prime rents, prompting landlords to offer incentives and discounts.

On the other hand, Nigeria recorded increased occupier activity in the market driven by office relocations from the CBD to the suburbs, as occupiers gravitated to locations offering both better quality accommodation, as well as more affordable lease rates. Furthermore, occupier activity in locations such as Tanzania is expected to recover underpinned by renewed investor confidence fuelled by the new leadership.

Data from Knight Frank indicates that the share of new office space requirements across the nine countries they are located in was dominated by Professional Services (29%), Industrial & Logistics (16%), Financial Services (14%), Healthcare 12% and NGOs (8%), who together accounted for almost 80% of new office space requirements across Africa in Q2.

Knight Frank also observed that businesses that had previously put office requirements on hold due to the pandemic were reactivating their searches with landlords becoming more flexible by allowing 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Share of new office space requirements by sector – Q2 2021 Source: Knight Frank Research for discounted rents and lease concessions such as increased rent-free periods in a bid to attract and retain tenants.

Tilda Mwai, Senior Researcher Knight Frank Africa says: “The overarching trend across Africa’s office market is the continued flight to quality. Occupiers remain focussed on occupying best-in-class offices that offer greater flexibility around lease terms. The desire to be in 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 offices. That said, this presents a real opportunity for landlords of slightly older buildings. If refurbished to a new, modern standard, they can compete effectively for tenants looking for high quality offices.”