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Commercial property sectors throughout the world have been hit by the pandemic, and it is no different in Africa, where many cities are suffering high vacancy rates.
There are, however, some positive signs of rebound as mass vaccination rollouts and eased pandemic restrictions spur investor confidence.
“This will bring an increase in rental enquiries in all property sectors, says Geoff Kruger, client advisor for Swindon Property sub-Saharan Africa.
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Swindon Property’s first edition of their African Cities Insights for Q2: 2021 – which shares local insights, trends, and investment opportunities in the sub-Saharan African markets they operate in, suggests that most of the leasing activity is coming from space reductions by existing tenants.
Landlords are more willing to grant extended rent-free periods of up to six months and beyond, rather than offer prospective tenants a fit-out allowance, which has, due to budget constraints, become high in demand versus the shell and core option.
“We’ve noted that larger companies using the hybrid approach have relinquished, on average, between 2 000m² and 5 000m² of their office space, putting much pressure on landlords…Across the board office rental rates have decreased.”
The report also finds that:
Prime office rental rates for A+ grade office space in the most affluent area of Lagos, Ikoyi, has dropped by about 20% from $780 (about R11 000) per square meter in 2017 to $630 per square meter in 2021.
In Nairobi, monthly prime commercial office rents of $13 per square meter in the second half of 2020 have decreased to between $11 and $12 per square metre.
Prime rentals in the Accra Office market in Ghana have dropped from $35 to $40 per square metre per month to a more competitive average of $25 to $30. Here, landlords are prepared to offer generous incentives such as three to six months’ rent-free periods as well as other tenant incentives.
In terms of the industrial sector the report indicates a bigger demand for warehousing space, even though there is less demand for retail space possibly due to an increase in online shopping.
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The biggest trend by far can be seen at shopping malls. Most retail outlets have reduced their floor spaces, yet although fewer people are visiting malls, there is a notable increase in strip malls, especially in Nairobi, Kenya as it seems to offer easier access with less security checks.
Angola’s economy continues to struggle and has been very slow to respond to the pandemic recording a fourth year of recession.
Here, office rent has decreased dramatically over the past five years as multinationals continue to leave or decrease their space requirements. In about 2010, rents were about $150 per square metre but energy companies who have always paid the highest rents are now refusing to pay even $100 per square meter per month.
Despite this, Kruger says there is hope that the retail sector in Angola can drive economic growth in the next quarter.
Windhoek is Namibia’s largest city and the four years of economic recession before the pandemic has had a huge impact on its real estate market, resulting in it contract about 50% over the past six years.
It will take therefore take real growth in the local economy for it to recover. To make matters worse though, Kruger says local commercial banks are reluctant to finance new transactions.
“Besides low cost and affordable housing schemes there is currently no new residential, office, retail, or industrial development in progress.”