According to Estate Intel, the Grade A office market is expecting a major supply glut across Lagos State 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 oversaturate the market by 2026 -resulting in a tenants’ market.

In this article, we highlight how these additions will influence the Lagos Grade A office market by 2026. 

Background on Lagos Office Market

Over the last 10 years, as developers worked to meet the growing need for commercial office spaces in Lagos, there have been periods of market oversaturation underpinned by large supply dumps in a short timeframe. 

 

 

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% 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.

 

With a pipeline of 107,249m², the Lagos Grade A office market will be tenant-led in 2026

Currently, the Lagos Grade A office stock stands at 154,689m² boasting an occupancy rate of 71.35%. 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. 

 

Furthermore, according to Broll, the Victoria Island and Ikoyi office submarkets recorded a 4.28% and 13.75% y-o-y reduction in net average asking rent(US$)/annum/m² in 2016 amidst increased competition between building owners to attract tenants and keep vacancy rates low. With the current average rent of Grade A office spaces approximately $710/annum/m², if it emulates the 2016 dip, the rents could reduce to an average of up to $645/annum/m².

 

The Ikoyi and Victoria Island office submarkets will receive 75% of the expected supply 

 

According to the data being tracked by Estate Intel, the lion’s share of the Lagos office pipeline will be delivered to the Ikoyi (35%) and Victoria Island (40%) submarkets- as such these markets are likely to record a higher rate of decline in terms of decreased rents and occupancy rates. 

 

How can the market mitigate the impending property dip?

To mitigate against the expected supply glut, developers could consider expediting construction to meet an earlier completion date thereby avoiding the 2026 delivery timeline and providing room for existing stock to be leased earlier. 

Typically, it takes 2 years for good quality office buildings to attain stable occupancy. For instance, Heritage Place (completed in 2016) achieved 70% and 90% occupancy after about 2 years and 4 years consecutively. As such, early completion of Grade A office pipeline projects will be crucial to achieving stable occupancy sooner. 

On the other hand, where possible, development designs can be updated to mixed-use thereby widening the development’s use and limiting the impact of the projected office market dip. 

In terms of investment opportunities, we expect to see limited activity in the office market against the backdrop of a Grade A office supply glut as investors seeking development opportunities opt for other property sectors. On the other hand, although unlikely, those interested in this market segment could seek pre-lets before breaking ground on a new development to shield themselves from existing market conditions. 

 

Grade A Office Pipeline Projects

Some of the notable project additions include:

• Dangote Industries HQ – Ikoyi, Lagos

 

 

Status: Under Construction

Developer: Dangote Industries Limited

Size: 17,000m²

 

• Dillon Twin Towers – Victoria Island, Lagos

 

Status: Under Construction

Developer: Dillon Consultants Nigeria Limited

Size: 5,060m²

 

• Harbour Point Towers – Victoria Island, Lagos 

 

Status: Conceptual

Developer: Harbor Point Limited

Size: 20,000m²

 

• Leadway Tower – Victoria Island, Lagos

 

Status: Conceptual

Developer: Leadway Insurance

Size: 9,343m²

 

Estate Intel loves your feedback! Let the Insights team know what you think about Thinking of renting a Grade A office? Wait till 2026 by emailing [email protected].

 

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