Harare’s central business district (CBD) office space occupancy witnessed an improvement during the fourth quarter of 2022, compared to the previous quarter, on the back of repurposing of space.
The CBD office space has been facing challenges with voids increasing as businesses migrated to suburban offices or office parks that are cozier.
This was worsened by the outbreak of the Covid-19 pandemic, which resulted in companies adopting remote working and therefore downsizing their space uptake. Others completely shut CBD offices, worsening the voids.
However, according to global real estate consultancy Knight Frank’s Africa Office Market Dashboard Fourth Quarter 2022, there has been an improvement as a result of a boom in the small to medium enterprise (SME) sector, especially the retail side.
Landlords have repartitioned space into smaller units to meet the rising demand from the SME sector.
“In contrast to Q3 2022, when there was an increase in office vacancies due to organisations relocating from the CBD of Harare, the final three months of 2022 have seen a decrease in vacancy rates as previously abandoned offices are being partitioned into smaller units and leased to SMEs,” said Knight Frank.
As companies laid off staff due to the pandemic, these resorted to starting their own businesses mainly apparel, beauty and hair products as well as electronic gadgets retailing. According to Knight Frank, region-wide, the African office market has recorded increased occupancy levels in most countries, now averaging 80 percent, a significant increase from the 71 percent recorded at the beginning of 2022.
The increased occupancy levels have been driven by the full return of employees to working from their physical offices as these markets emerged from the pandemic, plus a significant increase in occupier activity.
Boniface Abudho- Africa Research Analyst, Knight Frank, explained: “The growth in occupancy is attributed to the resurgence of physical office operations post-pandemic, as well as a heightened influx of both multinational and regional occupier requirements into the African office market.
“Our outlook for the office sector remains increasingly optimistic as we anticipate a recovery of office rents to pre-pandemic levels and in some markets beyond, driven by the heightened demand.”
The real estate consultancy firm also reported sustained demand for Grade A offices in Africa’s major cities like Lagos, Casablanca, Nairobi, Cairo, and Kampala.
According to their findings, corporates are actively targeting higher quality space to overcome challenges associated with attracting and retaining talent and to meet increasing Environmental Social Governance (ESG) considerations, which before now appeared to be largely confined to international businesses.
Anthony Havelock – Head of Africa Occupier, Landlord, Strategy and Solutions, Knight Frank said the demand for premium office space throughout the continent was rising while the supply of true Grade A properties was slow.
In relation to ESG considerations Africa currently has only 785 green-rated buildings, with the majority,641, located in South Africa.
“A huge gap persists between action and ambition, but there is a mind-shift occurring being driven by the larger corporate entities,” he said.
Another significant trend observed this quarter is the depreciation of the value of local African currencies compared to the robust US dollar. Knight Frank reports that this decline is starting to create a dual-tier market in some countries, with developers seeking to mitigate the effects of currency devaluation by requiring US dollar-denominated rentals as a means of protecting themselves against further financial losses. – The Herald
