Prime office rental value in Victoria Island and Ikoyi, Lagos submarkets are expected to remain stable around N216,000 ($600) per square metre (psqm) and N252,000 ($700) psqm respectively in 2018, New Telegraph has learnt. Besides, rents for retail segment of the real estate market are also expected to experience stability throughout. According to analysts at International Real Estate Partners (IREP), rents in office and retail markets will remain at their current levels as companies strive to secure a firm growth trend. Following global and local market dynamics, the analysts pointed out that annual prime office rents in Victoria Island and Ikoyi submarkets would remain around $600 per square metre (sqm) and $700 (sqm) marks respectively.
Given the stabilisation of rentals, they added that some prudent companies would seize the opportunity to obtain ideal office space at very reasonable prices. In the first quarter report of IREP, the analysts said: “We also anticipate that there will be more relocations to newly built, and better managed facilities, as general business environment improves. “However, we do not anticipate any major new entrants (occupiers) into the office market as blue chip and multinational firms will continue their prudent ‘wait and see’ approach to space acquisitions.”
The report said that landlords on the other hand were faced with the need for product differentiation while trying to maintain a profit on investments. In addition to rentals, the IREP’s analysts noted that with some of the additional pressures that might negatively affect real estate market in Lagos, such as the changes to the Land Use Charge, it was time to entice corporate tenants to take up more formal office spaces “with the lure of a lifestyle change by including cafés, gyms, crèches and a bit of retail, as well as green solutions and power saving features in the offerings.”
Like the office market, the analysts said they did not anticipate any change in actual retail rentals as tenants continue to negotiate concessions and rent holidays from landlords. On prime office pipeline for Victoria Island and Ikoyi, the IREP’s report stated that with the adoption of naira-based leases, many smaller retail centres had increased their uptake from retailers.
“For those larger malls that are unable to convert their leases to naira, agreeing a fixed exchange rate, lower than the inter-bank rate, helps to retain good tenants,” they said. Despite the difficult operating environment, the analysts said that the retail market has been gradually recovering, a situation that is evidenced by the increase in footfall in some malls such as Circle and Novare Malls in Lekki.
They attributed the reduced vacancy rates and some increased activity in these malls to new international retailers like the new Japanese retailer, Miniso. The IREP report read: “Without a doubt, the size of the population of Nigeria is every retailer’s dream. While the cinemas and the grocery tenants draw a large portion of the shoppers as anchors, it is observed that the paying customers are desirous of a more exciting retail experience.
This is evidenced by the population at the various retail fairs organised from time to time. “The task at hand is to ensure that increased footfalls translate into actual sales; landlords and developers will need to invest in intense marketing and promotional activities to ensure that their respective centres remain the preferred retail centre of choice.”
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