Owners and managers of commercial properties are beginning to see vacant office buildings as a huge challenge, which is due to companies’ adoption of Work from Home (WFH) because of the economic realities in Nigeria. Remote work among employees began during the COVID-19 pandemic, becoming a permanent trend afterwards. This work style was more encouraged by the removal of fuel subsidy, costs of staff transportation and rising operations. Northcourt had also recently predicted an increased adoption of flexible work arrangements, due to fuel subsidy removal.
During this period of subsidy removal, companies would either be forced to increase transportation fees in remuneration or adopt hybrid work systems. Firms that had returned to full office work after the pandemic might reconsider office schedules to reduce transportation costs. This period would also see some firms delay rent payments and reduce space requirements. The consequence of all these is massive in the commercial real estate industry as property owners and managers lose revenue, while government agencies lose taxes.
Some office buildings are currently undergoing conversion into residences.
Report has it that there is still moderateness in the demand for premium office spaces, particularly among tech firms, although there is a considerable decline in the demand for generic offices. This has resulted in a rise in office vacancy rate in many Nigerian cities in Lagos, Port Harcourt, Abuja and Kaduna States, causing conversion of empty spaces into residential buildings. There has also been a downward shift in the traditional demand drivers in the office market.
In 2022, the situation of the office space market was not so impressive as there was no new project launched in Lagos, which is the commercial hub of the country. Although market volatility has reduced, there are challenges with the economic backdrop due to rising inflation and interest rates, and pressurizing of properties that are in need of remodelling and refinancing. Some office buildings in Ikeja, Ikoyi, Maryland, Surulere, Victoria Island, and Lekki Peninsula are currently undergoing conversion into residences.
Professional estate agents have different perspectives on the market state.
According to officials, majority of the office conversions are in residential areas where rent is quite expensive, with houses in short supply. State agencies have began issuance of fines to owners of these buildings. Professional estate agents and valuers do not have the same perspective on the current state of the market. Some affirm that changes are present in office segments and managers are ensuring their recreation, while others assert that the better option is renting as firms are still searching for office spaces.
Former Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Prof. Adebowale Kemiki, said that the major advantage of Work From Home (WFH) is that it reduces the cost of office maintenance. However, it would result in reduced demand for commercial offices and a rise in the number of vacancies in the commercial property segment. The Chairman of NIESV board of trustees, Chief Emeka Onuorah, said that renting is a better option to conversion of empty office spaces.
People are going for the WFH alternative because it is cheaper — surveyor.
Managing Director of Global Property and Facilities International Limited, Dr. Muhammad Balogun, stated that it had become challenging to rent out commercial office spaces after the COVID-19 pandemic as a result of the WFH options for companies. Chief Executive Officer of Kings Court Realtors, Mr. Emeka Okoronkwo, said that people are going for the WFH alternative because it is cheaper, without realizing that they are not generating enough revenue and are not working at full capacity. He urged the government to carry out an urban regeneration in Lagos Island business district.