The Angolan capital of Luanda is still the world’s second most expensive city for expats after Hong Kong, but rent for office space fell almost 50 percent in the past two years in the region’s top oil producing country, Bloomberg reported.
More than 20 percent of new office buildings in Luanda are empty.
“Luanda still has the highest office rents in Africa, but demand has virtually ground to a halt,” said Peter Welborn, the London-based head of Knight Frank’s Africa unit.
Monthly prime office rent in Luanda fell from $150 a square meter in 2015 to an average of $80 per square meter this year, according to real estate consultancy Knight Frank. In Abuja, rates dropped 45 percent to $33 a square meter. Lagos saw rent fall 21 percent to $67. Johannesburg, which is net importer of oil, saw office rents drop 23 percent, while Dar es Salaam held steady.
Rent has fallen for office space and luxury homes in Nairobi, where there’s an oversupply following an exit of expatriates, Business Daily reported.
Kenya became a hotspot for oil and gas exploration after 2012. British explorer Tullow Oil and partner Africa Oil struck oil in Turkana in 2012. Recoverable reserves are estimated at 750 million barrels of crude.
The price of crude has fallen more than 50 percent since mid-2014. Nigeria, the region’s second-largest oil producer after Angola, is in recession.
Rent in Nairobi malls has stagnated on increased supply. Rent for prime office has dropped 20 percent to $16 per square meter a month over the past two years. But Kenya is short of high-end industrial space. Leasing costs for industrial space increased 11 percent to $4.70 per square meter per month, Knight Frank reported:
“The high levels of new supply of commercial office space have negatively affected rental levels and occupancy rates,” said Knight Frank in reference to Kenya. “Luxury homes sale prices increased marginally, but prime rental prices declined as a result of a slight oversupply, which has been partly attributable to the exodus of a large number of expatriates following the downsizing of Kenya’s oil extraction industry.”
Rent on the high-end Kenyan homes preferred by expats has dropped 13 percent. A four-bedroom executive house rents for $4,100 per month.
This will likely hurt high-net-worth investors like pension funds and insurance companies which have spent billions of shillings on office blocks, changing the skyline of areas like Upper Hill in Nairobi, Annie Njanja reported in Business Daily:
Real estate investors and buyers of Treasury and corporate bonds have recently emerged as the biggest gainers in terms of return on investment amid a bear run in the stock market.