March 14, 2016

Lagos Grade A Office Demand Drivers: The Big 4 Accounting Firms

Dolapo Omidire

As most residents of Lagos should be able to testify, 2015 was a big year for office completions. In Victoria Island and Ikoyi, projects like the Civic Tower, Temple Tower and Rising Sun among many others, began the redefinition of the city’s skyline. This large increase in completions also supported a big year for the accounting ‘Big 4’, as their relocation activity accounted for 9,400m2 of office space take up during 2015.

Prior to 2015, KPMG, who completed their move to Victoria Mall Plaza II in 2011, were the only one of the Big 4 occupying relatively prime/formal office space. However, with the significant increase in availability of prime offices in 2015, Deloitte, PwC and Ernst & Young joined in, as they committed to fully relocating out of Grade C office space or space that was made from a residential conversion.

In 2015:

  • Deloitte took up 5 floors translating to ±3,400m2 at the recently delivered Civic Tower in Victoria Island, Lagos. Deloitte’s former HQ was in the old Akintola Williams Deloitte House building that can be seen from Ikorodu Road in Ilupeju.
Civic Tower, Ozumba Mbadiwe Avenue - Victoria Island
Civic Tower, Ozumba Mbadiwe Avenue – Victoria Island
  • PwC took on a pre-let a few years ago at Landmark Tower in Oniru/Victoria Island Annex for 4 floors, translating to ±4,000m2. It was completed in 2015. PwC’s HQ had been in a block of flats on Muri Okunola Street in Victoria Island.
Landmark Tower, Victoria Island Annex/Oniru. Image Credit:
Landmark Tower, Victoria Island Annex/Oniru. Image Credit:
  • Ernst & Young completed their move to UBA House on Lagos Island in 2015. They now occupy 4,000m2, an increase of 2,000m2. Before this, they were split between a residential office conversion in Ikoyi and UBA House.
UBA House, Lagos Island. Image source: Logbabay
UBA House, Lagos Island. Image source: Logbaby

In 2011:

  • KPMG took up over to 4,000m2 in Victoria Mall Plaza II owned by UPDC. Now they occupy over 5,000m2. Prior to this relocation in 2011, they were also partly based in a residential office conversion in Ikoyi.
Victoria Mall Plaza II, Victoria Island - Lagos. Image Source: Nairaland
Victoria Mall Plaza II, Victoria Island – Lagos. Image Source: Nairaland

While they are referred to as the accounting Big 4, these firms are more accurately classified as professional service firms because they do much more than accounting/auditing. They also offer consulting, advisory, regulatory and I.T services; and demand for these services has grown significantly as more local and international firms expand, make a first entry in Nigeria or require guidance in navigating the Nigerian business environment. According Source Global Research, in more developed markets such as the United Kingdom, the Big 4 are strategically expanding into consulting as the audit market matures. Their consulting businesses, which grew by 11.5% to £2.55bn in 2015, is slowly eating into the market share of the large management consultants like Bain and McKinsey.

Aside their desire to agglomerate, the Big 4 typically play a large role in most office markets. Firm to firm competition usually finds its way into the equation as they all push to occupy the best offices. PwC and Deloitte, managed to catch up with KPMG in occupying high-rise/prime office buildings in the commercial capital of Lagos, Victoria Island. However, Ernst & Young remained the outlier as they chose to fully relocate to the old Central Business District of Lagos, Lagos Island.

Does this mean Ernst & Young may move soon? No. Its not impossible, but outliers are common among the Big 4. In other African countries only 3 of the Big 4 are located in the same node. In Ghana, PwC, Ernst & Young and Deloitte occupy space in Airport City, a growing urban centre beside Kotoka International Airport – Accra, while KPMG is located in Abelenkpe, Accra. In Kenya, KPMG, Deloitte and PwC occupy space within the Westlands region in Nairobi, popularly known as Westie, while Ernst & Young are located in Upperhill, Nairobi.

Coming back to Nigeria, before their new developments were completed, developers such as Landmark, Quantum Capital Partners and UPDC were strategic in approaching PwC, Deloitte and KPMG respectively to lease a significant amount of space in their buildings, all of which are now almost fully let. In lieu of new entrants and expansions, relocations are now said to be the largest driver of leasing activity in Lagos. In a market with rising supply and fierce competition, developers need to be particularly strategic in acquiring tenants. The ability to identify market drivers and target specific sectors is increasingly important, especially for developers who are embarking on fully speculative projects.

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