Recent monetary and fiscal policies are likely to have led to mixed developments in the prime office real estate market, with rents remaining stable or, in certain cases, even increasing in the country’s major cities.
Although the market is tenant-friendly, the devaluation of the naira is putting pressure on tenants as they now have to pay significantly more rent in the local currency while rents in dollars remain relatively stable.
Prime office rents in Lagos range from $550 to $900 per square metre (psm) in some completed transactions, with the transition to remote working becoming an almost permanent fixture, particularly in sectors such as logistics, financial services, technology and e-commerce. This shift has further impacted office demand as hybrid working patterns remain in place, resulting in fewer workers visiting the office.
From 2019 to 2024, rents for prime office space in key cities showed an upward trend. In Abuja’s central business district, average prices rose from ₦40,000 per square meter in 2019 to ₦169,260 per square meter in 2024. Rents for prime office space in Lagos also increased: Lekki Phase 1 reached ₦180,000 per square meter in 2024 – up from ₦60,000 per square meter in 2019. By 2021, demand for prime office space was further fueled by the return to business activity (post-pandemic).
Old Ikoyi and Victoria Island reached ₦375,000 and ₦245,000 per square metre respectively. Demand growth appears to be concentrated in Lagos, where supply remains subdued. Prime developments, with some multinationals renegotiating leases for smaller spaces or exiting altogether.
The office market continues to be driven by tenant preferences, with the balance of power clearly on the demand side due to oversupply, particularly in the prime segment. This oversupply has increased competition among landlords and made the market a tenant-driven market where tenants have greater bargaining power in negotiations.
CEO of Knight Frank Nigeria, Frank Okosun, told The Guardian that the current price increase in the office market is influenced by prevailing economic conditions rather than strong market fundamentals.
While rental prices in dollars have generally remained stable, there has been a significant increase in the equivalent in naira due to exchange rate fluctuations.
“The stability of rental prices indicates a robust market. As supply shrinks in the near future, this stability presents potential opportunities for investors and tenants alike,” he said.
He explained that in cities such as Lagos, Abuja and Port Harcourt, where demand for prime office space is highest, rental prices have remained stable. He noted that in the Lagos market, where rents are often quoted in dollars, fluctuations in the naira have created some volatility.
“Despite landlords’ efforts to retain tenants, occupancy rates in the market remain suboptimal, except for newly completed properties with lower rental prices,” he said.
According to him, occupancy is at 70 to 80 percent. “The ongoing economic challenges have increased companies’ operating costs, prompting many to consider moving to more cost-efficient premises.”
Okosun said: “As real estate forms the basis of economic activities, the dynamics of the office market are influenced by the broader economic environment, which is characterized by rising operating costs and a growing need for cost-effective solutions.
“To make matters worse, there is an existing oversupply in the market and significant demand for office space, which is leading to an increase in available inventory. As a result, companies are increasingly looking for cheaper options, due to the twin factors of oversupply and exchange rate-related rent increases.
“It has therefore become essential for project developers to enter into pre-lease agreements to ensure the financial viability of future projects. These agreements not only provide occupancy guarantee but also help mitigate the risks associated with the current market oversaturation,” Okosun added.
Chairman of the Association of Capital Market Valuers (ACMV), Mr Chudi Ubosi, confirmed that most rents were stable. He said that given the rapid devaluation, tenants were finding it difficult to make dollar-denominated payments as their income and income opportunities were limited due to the poor economic situation.
“Many tenants whose rent needs to be renewed are looking for ways to reduce it and convert it to the local currency (which in most cases means a reduction) or, in the worst case, leave it at the current level.
Ubosi, who is also the majority shareholder of Ubosi Eleh and Company, said many landlords are doing everything they can to keep their current tenants even at reduced rents, as the poor economic situation is making it difficult to find new rental properties.
He also revealed that rental prices of many properties have increased as rents try to match inflation. However, Ubosi noted that demand for prime office space is low. “Supply is quite high as few commercial projects are expected to come to market in the next 12 to 18 months if the pace of development is maintained; many of the completed projects are struggling to get leased,” he said.
Chairman of Estate Link, Mr. Gbenga Olaniyan, explained that prime office rents in major cities, particularly Lagos, have fallen significantly in recent years.
In areas such as Victoria Island and Ikoyi, where some of the country’s most significant prime office buildings are located, rents have fallen by more than 30 percent since 2016. This decline can be attributed to several factors, including the economic situation and post-COVID employment trends.
“The depreciation of the naira has not helped as some rents expressed in dollars no longer make sense when converted into naira. Such rents have been negotiated down in dollars, even though they are often higher in naira. For example, a rent of $800/sqm in 2020, when the exchange rate was 380 to 1, was about 304,000 naira.
“Today, a 50 percent fall in rent in dollar terms to 400 to 1 dollar means that rent rises to 620,000 naira/sqm at 1,550 naira to 1 dollar. This has been particularly the case in Lagos. Abuja has been less affected because the supply of prime offices is limited and several shopping malls have been converted into offices to maintain rents.
“Despite the decline in rental prices in Lagos, the prime office property market has shown resilience after a post-COVID-era lull. While some new buildings coming onto the market are struggling to be occupied, key, established buildings continue to enjoy high demand,” he said.
Chairman of the Lagos branch of NIESV, Gbenga Ismail, also agreed that Grade A rentals are stable. “Prices reached a high of $1,000/sqm in six years. Occupancy for prime Grade A is 60 percent. It also takes three years to fill 3,000 sqm of space and the average occupancy for Grade A is three to six months for 500 sqm of space.”
Northcourt CEO Ayo Ibaru said the high rate of inflation, which erodes purchasing power, is forcing landlords to adjust rental prices. The devaluation of the naira against the dollar, with exchange rates as high as 1,600 naira per dollar, has put additional pressure on landlords to increase rents.
“This has led to stronger demand for Class B assets. It has also led to a rise in work-from-home rates. This has raised concerns as transactions are declining and some office buildings are half occupied or vacant, triggering a trend of residential conversion into offices. The Class A office segment is facing challenges from rent defaults – and the exit of multinationals is dampening confidence in the market.
The Federal Government has signed a Memorandum of Understanding (MOU) with Shelter Afrique Development (ShafDB) to build 5,000 housing units as part of the “Renewed Hope” programme.
Signing the agreement during the ministerial press conference in Abuja, the Minister of Housing and Urban Development, Ahmed Dangiwa, said the bank would provide advisory services and finance competent developers.
Dangiwa said: “This is the first time the ministry has entered into such a practical and direct partnership with a multilateral institution to build housing for Nigerians.”
“When we took office, we developed an action plan that was in line with the President’s priorities and objectives. This was necessary to guide the implementation of reforms and initiatives that will improve access to affordable housing for Nigerians, unlock the potential of the housing sector, contribute to economic growth and improve the urban landscape.”
In his response, the Bank’s Managing Director, Mr. Thierno Habib Hann, appreciated the gesture of cooperation with the Nigerian government in providing housing.
Earlier, the Permanent Secretary, Dr. Marcus Ogunbiyi, commended the media for their consistency and commitment to the activities of the Ministry and promised to work with them as partners in progress.
