Notable increase in Average Office Occupancy Rates as Demand for Premium Grade ‘A’ Offices Continues

Occupancy rates hit 80 percent as clients seek offices built to international standards

27 March 2023

3 mins read

9th February 2023

The Africa office market continues to post increased occupancy levels in most countries, now averaging 80%, a significant increase from the 71% recorded at the beginning of 2022. This is according to the Africa Offices Market Dashboard Q4 2022, released by global real estate consultancy Knight Frank.

According to the report, the increased occupancy levels are driven by the full return of employees to working in their physical offices as these markets emerged from the Covid-19 pandemic, plus a significant increase in occupier activity.

Boniface Abudho, Africa Research Analyst, Knight Frank, explained: “The growth in occupancy is attributed to the resurgence of physical office operations post the Covid-19 pandemic, as well as a heightened influx of both multinational and regional occupier requirements into the African office market. Our outlook for the office sector remains increasingly optimistic as we anticipate a recovery of office rents to pre-pandemic levels and in some markets beyond, driven by the heightened demand.”

Knight Frank specifically reports a sustained demand for Grade A offices in Africa’s major cities of Lagos, Casablanca, Nairobi, Cairo, and Kampala. Corporate companies are actively targeting higher quality space to overcome challenges associated with attracting and retaining talent and to meet increasing Environmental Social Governance (ESG) considerations, which before now appeared to be largely confined to international businesses.

Anthony Havelock, Head of Africa Occupier, Landlord, Strategy and Solutions (OLSS), Knight Frank notes: “As the demand for premium office space increases throughout the continent, the supply of true Grade A developments looks increasingly in short supply with a limited pipeline, presenting a potential opportunity for developers. ESG considerations are gaining prominence among real estate investors and occupiers globally, and this trend is expected to drive capital and occupier demand towards buildings rated with ESG credentials. Currently, Africa only has 785 green-rated buildings, with the majority (641) located in South Africa. A huge gap persists between action and ambition, but there is a mind-shift occurring being driven by the larger corporate entities.”

Another significant trend observed this quarter is the depreciation of the value of local African currencies compared to the robust US dollar. Knight Frank reports that this decline is starting to create a dual-tier market in some countries, with developers seeking to mitigate the effects of currency devaluation by requiring USD-denominated rentals as a means of protecting themselves against further financial losses.