Nigeria’s rail modernisation effort is driving change in real estate as stressed out Lagosians look to live beyond expensive housing in ... the commercial capital. If this is combined with serious industrial growth along transport corridors, it could flip decades of Lagos-centric growth.
The company is likely to seek the funds around the middle of the year to enter the new markets, while strengthening its presence in its existing cities, Schwebig says. The company will likely seek between EU10m and EU20m, with a mixture of equity, debt and mezzanine finance, he adds.
COVID-19 is prompting companies to reassess whether office employees are best deployed in fixed and permanent positions. Corporate clients are becoming less willing to commit to leases of three, five or ten years, Schwebig says.
Some companies will prefer to “consume the office as they need it” and so save money on maintaining traditional offices, which are subject to unpredictable pandemic restrictions
- Schwebig gives the example of a down payment of office rent of three years being required in Nigeria.
- Africans are “leaving the traditional office” but can’t rely on working from home to the same extent as, for example, in the US, Schwebig says.
- Many employees don’t have enough equipment at home and may lack a reliable energy supply, he points out.
- L’Oréal, Schwebig says, is an AfricaWorks client which had a global work-from-home policy, but found it difficult to implement in Abidjan.
Globally, research from JLL predicts that 30% of all office space will be flexible by 2030. Yet the amount of space needed in African markets is set for a period of contraction. According to the Rode’s Report for the third quarter 2020, the South African office market has been seeing its highest vacancy rates since 2003.
- Rode’s says that the net result of the pandemic will be a contraction of required space, and that tenants now have the upper hand in lease negotiations.
- The report also argues that distance working brings disadvantages for employers.
Training and acculturation of new employees is more difficult, and the morale of some staff may be affected, it says.
In Casablanca, there was oversupply in the office market even before COVID-19 in a context of continuing construction, according to Oxford Business Group.
- In October 2019, Deloitte found that 22% of Casablanca’s office space under construction was pre-ordered, down from 38% in 2018.
Flexible offices are the middle ground between corporate offices and homeworking, Schwebig says. They are usually private offices for people working from the same company, rather than open-plan floor space.
AfricaWorks raised EU3.5m from venture-capital funds and family offices in a round which closed in early December. The existing portfolio is in Abidjan, Accra, Cape Town, Dakar, Lagos and Nairobi, with tenants including Universal Music and Uber. The company plans to open 30 office spaces in Africa over the next three years.
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The company also plans to open spaces in Paris, London and Dubai by the end of 2021. These cities are well stocked with flexible office space, but Schwebig hopes to carve out a niche among organisations with African interests.
- Tenants will be able to join an app-based network of clients in Africa.
- The app is currently being piloted and Schwebig expects to roll it out from January.
The Bottom Line
Office oversupply means that tenants are likely to have the upper hand in the flexible as well as the traditional market.
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