An Estate Intel report has projected that the Grade ‘A’ office market will witness a supply glut in Lagos because of the addition of over 100,000 square metres of office space in the next three years.
Class A or Grade A offices are modern premises that offer top-notch amenities and facilities, along with advanced infrastructure and a central location.
According to the report, the Grade A office market is expecting a major supply glut in Lagos through the addition of Ulesh Ikoyi (16,390m2) in Ikoyi, Lagos, 27 Glover Office Tower (8,160m2) in Ikoyi, Lagos, and Waterview (20,000m2) in Victoria Island, Lagos.
“These additions are certain to over-saturate the market by 2026, resulting in a tenants’ market,” it stated.
It noted that over the last 10 years, as developers worked to meet the growing need for commercial office spaces in Lagos, there had been periods of market oversaturation underpinned by large supply dumps in a short timeframe.
The report stated, “Key periods of Grade A market oversupply in Lagos State were 2016 and 2020. During the supply dump in 2016, close to 100,000m2 of office space was added to the Lagos office market with Ikoyi and Victoria Island playing host to 85 per cent of the stock. Out of the 100,000m2 supplied in 2016, 50,000m2 was within the Grade A office segment through the addition of Alpha 1 (8,000m2) in Eko Atlantic, Lake Point Towers (14,730m²) on Banana Island, and the Wings Towers (27,000m²) in Victoria Island, thus leading to a property market dip which was further worsened by recession.
“Currently, the Lagos Grade A office stock stands at 154,689m2 boasting an occupancy rate of 71.35 per cent. By 2026, the stock will almost double to 267,230m2, thereby causing a dip in the market and driving leasing activity as tenants upgrade from lower-grade office buildings. Based on the expected supply and previous market performance, we anticipate the 2026 office market to be a tenant-led market where prime Grade ‘A’ office spaces in Lagos will be available at comparatively lower rates.”
To counteract the anticipated surplus in supply, an estate surveyor, Olorunyomi Alatise, recommended concentrating efforts on submarkets that demonstrate a robust demand.
He said, “In addressing the challenges posed by the decline can be approached through various strategies. One avenue involves directing attention towards submarkets that demonstrate robust demand, particularly those situated in flourishing areas or characterised by minimal vacancy rates.
“Another viable option is to broaden the portfolio by venturing into different property types, such as retail or industrial properties. Owners and developers may also explore the potential of repositioning or redeveloping existing properties to align them more closely with the evolving needs of tenants. A concrete illustration of such a submarket is the commercial property market on Lagos Island.”
Meanwhile, the Chief Executive Officer of Magnificent Choice Services Project and Engineering Ltd, Jeremiah Akinsele, said many foreign direct investments were needed to mitigate the anticipated surplus.
He said, “Grade A offices predominantly exist on the island to address the anticipated surplus. It is crucial to incorporate a mixed development that includes both residential and commercial properties to prepare for this surge.”
