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Office Market Records Steady Decline As Remote Work Gains Popularity

6 mins read

AS the Covid-19 pandemic continues to affect how people live, commercial real estate especially office market has been severely affected.

Vacancy rate in the office market has seen steady increase as many companies continue to work remotely in response to the pandemic.

The H1- 2021 Office Market Report by real estate investment firm, Broll Nigeria, shows that transaction activity is the worst the market has recorded since the recession of 2016.

According to the report, only 191 square meters was signed in a single transaction in the first half of the year representing 86% decline in the new leases signed in H2:2020.

The report noted that new leases signed remain subdued and at its worst level in over five years while vacancy levels have risen.

Since the outbreak of Covid-19 in 2020, landlords have continued to seek strategies to retain occupancy.

Prime Business Africa’s investigation revealed that while some landlords have decided to maintain their rent or lease rates, some seek to give discounts to their occupants.

A  staff of Workstation- an office leasing company, who spoke to Prime Business Africa on condition of anonymity,  stated that since the pandemic, there had been a review in the price of office and coworking spaces.

“There has been discounted and more flexible plans that allow businesses and startups who have also been affected by the pandemic to access our workspaces in order to get work done but even at that, most people now prefer to work from home,” she said.

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She explained that the pandemic forced a large percentage of clients to work from the comfort of their homes, adding that many people may not return soon.

“The world is evolving, so is work and office. Work from home came as a result of the pandemic. People realised they could literally set up their workspaces at home. Although not everyone has been able to maximise and attain a full productivity level even while working from home. But soon, people will gradually return to the office environment because the ambience outside the office does not encourage networking with colleagues,” she said.

A landlord who runs a plaza with office spaces in Maryland, Lagos, Mr. Eze Chinedu, told Prime Business Africa that the pandemic caused a lot of rental problems.

He lamented that since the outbreak of Covid-19, most occupant could not pay their rent.

“People here have not been able to pay their rent, I am not sure they even have so much going on with them and I sincerely don’t blame them because even the way the country is, it is only unreasonable to disturb them for their rent. I now see only a few of them come in and out of the building, some of the companies have laid off their workers,” he said.

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A landlord who owns a property in Surulere, Lagos, Mr. Oludipo Williams, said the occupants of his office building had defaulted on their payment and asked for a discount or lease renegotiation.

Williams said, “There has been high rate of default in payment, occupants now say that we should give them time because they are yet to bounce back from Covid-19 losses. Most of them work from the comfort of their homes which gave them the licence to say they won’t be paying on time, we hope the whole thing goes off soon so that we can have our normal lives back.”

He disclosed that occupancy rate in his property had reduced by more than 50%.

“The rate of occupancy has really dropped from 100% to 50% or even less. Now, we don’t have up to 20 occupants in this building that takes about 45 companies because they are just trying to manage the economic situation caused by the virus,” he said.

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According to a real estate agent, Mrs. Fiona Afolabi, rents are likely to remain unchanged in the next few months as remote work and home offices become normal.

Broll Nigeria noted in its report that while asking rents would likely remain unchanged in the coming months, there would also be further decline in achievable rents with as high as 20% to 30% disparity between the rental values and initial rental offers.

“Landlords continue to manage the effects of an ongoing down market that is yet to bottom out. Favourable lease negotiations will continue to characterise the market and despite this there will be limited new leases,” the report said.

 

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