Knight Frank: Africa's prime office occupancy up 25% in 12 months

Africa's office property market has seen a significant 75% increase in occupancy levels, indicating a strong rebound to normalcy after a two-year slowdown primarily linked to the Covid-19 pandemic. This positive development was highlighted in the just released half-year office market dashboard for 2024 by Knight Frank, a renowned real estate consulting firm. The dashboard, which analyzes key office trends among 29 African markets, provides crucial insights into the current state of the office property market across the continent. One prevailing trend identified in the report is the stability in prime office rents observed in various markets such as Nigeria, Kenya, and Tanzania. This stability has been attributed to a relative oversupply of office spaces in these regions. Despite this oversupply, there has been a notable increase in occupancy rates, with the average office occupancy levels rising to 65% from 60% in the same period last year. This surge in occupancy has largely been driven by a return to traditional office settings in many African markets, marking a shift from the remote and hybrid work models adopted during the height of the pandemic. Furthermore, the African office market is currently characterized as a tenant-friendly environment due to an oversupply of lower-grade office spaces, giving tenants increased negotiating power, especially in cities like Lagos. On the other hand, there is a growing demand for high-quality office spaces, particularly A-grade offices, with countries like Botswana, South Africa, and Kenya experiencing high demand. This imbalance between demand and supply presents an opportunity for developers to cater to the need for premium office spaces in these markets. Additionally, there is a rising emphasis on environmental, social, and governance (ESG) considerations among occupiers in Africa. Countries like South Africa, Kenya, Egypt, and Morocco are witnessing a shift towards sustainable and green buildings, reflecting the global trend towards ESG compliance. Boniface Abudho, Research Analyst at Knight Frank, highlighted several key drivers behind the current trends in the African office property market. He emphasized the return to physical offices as a primary factor contributing to the increased occupancy rates across the continent. Despite the growing global trend towards hybrid work models, many African markets are witnessing a preference for traditional office environments, with a significant number of companies expected to enforce full return-to-work policies by the end of the year. Another key driver identified by Abudho is the focus on ESG compliance, leading to a notable increase in the demand for green-certified buildings. This shift is particularly evident in South Africa, where there has been a considerable growth in green buildings, aligning with occupiers' ESG criteria. While there is a heightened demand for high-quality and green-certified buildings, the supply remains insufficient across Africa, presenting a lucrative opportunity for developers to capitalize on this unmet need. Moreover, there is a growing demand for smaller office spaces in markets like Uganda and Tanzania, fueled by start-ups and SMEs seeking suitable solutions. Looking ahead, the future of the African property market appears promising, with a continued stability in prime rental growth expected in the short to mid-term. Markets like Botswana and Kenya, constrained by limited supply, are likely to maintain steady rental growth. However, markets such as Lagos and Malawi may face rental pressure in the long run due to oversupply. The trend towards green buildings is projected to persist, with countries like South Africa and Morocco anticipated to witness further growth in green building certifications. Occupancy rates are also forecasted to increase, potentially stabilizing around 80% on average by the first half of next year as more companies enforce full-time work policies. Additionally, the shift to hybrid and flexible workspaces is expected to continue playing a role across the continent, especially in markets like Egypt, where co-working and serviced offices are in demand among start-ups and small businesses.