Contrary to high vacancy rates for Grade A office buildings resulting from space oversupply across major cities of Nigeria, development and demand for co-working locations are on the rise, underpinning growth in the start-up community and millennial population in the country.
Co-working spaces, commonly called collaborative work-spaces, are today in high demand driven largely by tech start-ups and the millennials.
Though it is difficult to state the exact population of Nigerians in the millennials class, analysts estimate that they constitute 23 percent of the national population (about 40 million people), noting that this number has moved up since the last population count in 2016.
In its report which monitored the Lagos property market in Q1 2019, Knight Frank, an international firm of estate surveyors and valuers, affirms that millennials and tech start-ups have remained drivers of co-working space demand.
“Co-working locations in Nigeria, from just two in 2011, has grown to 109 and about 1.7 million individuals are now involved globally,” the firm said in the report.
The report quotes industry experts as suggesting that one co-working location opens every month in Lagos, confirming the city as the commercial nerve-centre and economic hub of Nigeria where opportunities and challenges are in mortal contest for the soul of budding enterprises.
In Lagos, co-working is already a trend that is driven by the city’s high start-up ecosystem. Nigeria has a strong entrepreneurial culture, according to Global Start-up Ecosystem 2017 Report, which valued the Lagos start-up ecosystem as the highest in Africa with a growth index of 6.6.
Expectation is that as these start-ups continue to spring up, there will be a stronger demand for co-working real estate solutions which means increased investment opportunities for the space suppliers.
Broll Nigeria, in its office market viewpoint, confirms that co-working in Lagos is expanding quickly and the bulk of supply is by local service providers, typically operating in stand-alone converted residential properties or C-grade office buildings.
“In Lagos, we see the global co-working trend through a varied number of local service providers operating in the market. With over 50 local co-working operators, Regus is the only international brand operating under a direct franchise model in the market,” Bolaji Edu, Broll’s CEO, told BusinessDay.
At the heart of co-working is the ‘plug & play’ concept which mitigates occupational obligations for tenants such as fit-out costs and lease negotiations while offering flexibility and ease of doing business.
These inherent attributes make co-working increasingly popular across the world, especially in emerging markets such as India and South East Asia. The Global Co-working Unconference Conference (GCUC) estimates a global growth of 108 percent by the year 2022, up from the 14, 000+ global co-working spaces recorded in 2017, showing the speed at which co-working is to expand.
However, the Broll report takes note of a few downsides in Nigeria as against global trend. Co-working in its truest essence is a fairly new concept in Lagos. Its operators tend to incur both the capital and operational costs of running their spaces which is a deviation from global trends that incorporate other operating models.
“Co-working in Lagos for many service providers is a secondary service line to other core service lines in the business. Typically, these businesses tend to be knowledge hubs that diversify into co-working services,” Edu observed, pointing out that there is a strong patronage of co-working in Lagos as many service providers are operating at full capacity and are rolling out expansion plans.
Available statistics show that 87 percent of operators are unwilling to expand to prime-grade buildings. Average occupancy rate is 74 percent; 50 percent of the operators have co-working as the core business line, while only 19 percent of the operators own their own space.
Source: By Chuka Uroko