How is the Prime Office Market across Africa performing?

The last half of 2020 saw majority of Africa’s regional economies ending the year in recession and activity across the prime office markets remaining relatively muted. As a result, our report notes that demand remained subdued with prime office rents across the markets tracked by Knight Frank declining by 11% on average in the year to December 2020.

Market activity continues to be varied across different cities whilst Lagos and Nairobi recorded the highest decline in rents by 25% and 20% on average in the year to December 2020 respectively, markets such as Abidjan recorded an increase in rents by 18% on average over the same period.

Office vacancy levels in Kampala increased by 6% year on year from 17% in H2 2019 to 23% in H2 2020. This was attributed to increased downsizing activities, postponement of office take up decisions by occupiers and the shift in a majority of occupiers’ preference to smaller fitted out spaces.

However, in Nairobi, absorption of Grade A and B office space increased by 13% in the second half of 2020 compared to the first half of 2020. This was attributed to the easing of lockdown measures and the gradual re-opening of businesses allowing multi-national and local occupiers to proceed with key business decisions and finalise transactions.

Occupier activity in the period under review was characterized by office relocations in a bid to consolidate space and acquisitions in a flight to quality as they sought to leverage on the softer market conditions with demand for smaller fitted out office spaces (<80 – 100 sq. m) remaining rife as flexible working patterns became the ‘new normal’.

Looking ahead, majority of the markets are expected to remain tenant favoured with landlords anticipated to continue granting concessions on lease renewals in a bid to attract and retain tenants.

Whilst vaccine optimism has generally boosted economic growth expectations across the region, the uncertainty created by recent infection resurgences, which have put some markets back into lockdown, could act as a deterrent for occupiers and potentially hamstring any recovery momentum built up towards late last year.

Therefore, the office market across Sub Saharan Africa is likely to remain subdued over the course of 2021 with earlier signs of recovery only expected in the last quarter of the year. However, we expect that the increased occupier activity in major hotspots such as Nairobi will continue.

Our H2 2020 edition of the Africa Offices provides occupiers, landlords and investors with a regular analysis of the rental performance and trends of prime office markets across 26 cities in Africa.

View online our Africa Offices Dashboard H2 2020

Photo by Alesia Kazantceva on Unsplash