As the Nigerian economy continues to struggle, demand for prime office space has also continued to weaken, leading to landlord’s flexibility and differentiation of products on offer.
Despite the weak demand, commercial real estate generally are going green and becoming transparent in terms of transaction. It is such that developers, investors and professionals are now willing, more than ever before, to share transaction details and to operate more transparently.
Most prime office developments that have been delivered in recent years or expected to come on stream are going green. Northcourt Real Estate’s recent market report lists some of the developments that have green features in Nigeria.
These projects which have attained energy efficiency certifications, according to the report, include Heritage Place, which obtained the LEED Silver certification, and Cornerstone Tower, which is EDGE- certified. Nestoil Tower and The Wings Towers are other instances of energy-efficient buildings.
For its economy and sustainability coupled with growing population and fast-paced urbanization, experts have identified green buildings as the future of modern housing.
Green buildings, residential or commercial, are those buildings that incorporates design techniques, technologies, and materials that reduce dependence on fossil fuels and negative environmental impact.
Such buildings have become important because they reduce costs of energy, water and materials by as much as 20 percent and design considerations now go beyond space comfort and convenience alone.
“Buildings account for about 40 percent of energy use globally and 19 percent of greenhouse gas emissions. By 2050, the built environment is expected to double due to high population growth and urbanization trends”, explained Shaninomi Eribo, Edge Expert and Founder/CEO, GreenSquareMetre, Population growth and urbanization trends are expected to occur most in emerging markets, particularly in middle and low income countries as could be found in the Sub-Saharan African region of which Nigeria is part.
Among suppliers of Grade A office space, the consciousness for sustainability is growing and, according to Ayo Ibaru, chief operating officer at Northcourt, this consciousness is influencing more commercial real estate spaces, reducing costs of occupation and being environmentally friendly.
Despite these advantages, demand for prime office space continues to fall and analysts attribute this to shrinking economic activities in the country. Commercial vacancy rates currently stand at 12 percent.
In Abuja, Nigeria’s administrative capital, the situation is dire. The Northcourt report says rentals in the Utako area of the city average ₦ 35,000 per square metre with commercial vacancy rates at 52 percent.
The report notes that more development pipelines are in the area as land prices average ₦112,000 per square metre. “In Wuse 1, for instance, rentals for office spaces go for ₦36,000 per square metre on average. Shops go for slightly lower at ₦35,000 per square metre while commercial vacancy rates average 45 percent,” the report said.
On the flipside, however, there is growing demand for co-working spaces, especially in Lagos. This has encouraged conversions of grade B offices.
This segment of the market has seen strong occupancy levels in mainland areas like Yaba, mirroring demand on the Island where spaces in Victoria Island and Lekki lead the charge. The millennial demographic, tech start-ups, women-led enterprises and SMEs have remained the leading drivers of demand for co-working office space.
“The recently launched Delta State Innovation Hub has also increased the demand for co-working in South-Eastern Nigeria,” Ibaru noted.
Credit: Business Day
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