Space suppliers optimistic as managed offices lead market shift

Over the years, the office market in Nigeria and space suppliers or landlords have been guided by optimism about economic growth and foreign investment. The market is now undergoing fundamental transformation, signaling new opportunities for investors.

A new report by Fortren & Company, a real estate research and advisory firm, notes that managed and flexible offices are emerging as a strategic response to deep-rooted challenges in the traditional office sector.

According to the report, Nigeria’s modern office landscape took shape in the early 2010s, when strong GDP projections and expectations of rising foreign direct investment encouraged developers to deliver large volumes of Grade A office space.

Prime corridors in Lagos and Abuja attracted significant capital, with landmark projects such as Heritage Place, completed in 2016, reinforcing confidence in long-term demand.

“The prevailing assumption at the time was that economic expansion would naturally translate into sustained demand for long-term office leases,” said Martin Uche, Research Director/CEO of Fortren & Company. “Developers and investors were responding rationally to the signals they were seeing.”

But the past decade has unfolded differently.

Fortren’s analysis shows that slower-than-expected economic growth, repeated currency devaluations, rising inflation and prolonged policy uncertainty have constrained corporate balance sheets and reshaped occupier behaviour.

At the same time, new office developments continued to enter the market, resulting in persistent oversupply and elevated vacancy levels—particularly within prime office locations.

“What we are seeing today is not simply the result of a weak cycle,” Uche said. “It reflects a structural mismatch between how office space has traditionally been delivered and how businesses now operate,” he added.

The Covid-19 pandemic intensified these pressures. Remote and hybrid work models became widespread, accelerating multinational exits, office downsizing and footprint rationalisation across both international and domestic companies. In response, landlords increasingly relied on rent discounts, extended rent-free periods and more flexible lease terms to attract tenants.

However, the report argues that these measures have had limited impact. “Concessions can soften the edges, but they do not solve the underlying problem,” Uche noted. “The conventional long-term leasing model no longer aligns with the financial and operational realities facing many occupiers.”

As corporates prioritise flexibility, speed to market and balance-sheet efficiency, many are unwilling or unable to commit to long lease tenures, significant upfront fit-out costs and long-term real estate exposure. This shift has created fertile ground for managed and flexible office solutions.

Managed offices, which offer fully fitted and operationally managed workspaces on flexible terms, are increasingly being adopted as an alternative to conventional leases. Despite continued pressure in the wider office market, Fortren’s data shows that the furnished office segment has recorded steady growth over the past decade.

Premium managed office providers continue to command rates of up to $6,080 per year for private dedicated desks, even as vacancy remains elevated across traditional office stock.

“Occupiers are increasingly consuming office space as a service rather than as a fixed asset,” Uche said, noting, “in a volatile economic environment, flexibility is no longer a nice-to-have; it has become a strategic hedge.”

The report highlights that supply in this segment is heavily concentrated in Lagos, with a growing but still limited presence in Abuja and selected secondary markets. Local operators dominate the space, often converting lower-grade commercial buildings and residential properties into flexible workspaces.

While small and medium-sized enterprises account for a large share of demand, the market also includes multinational and Fortune 500 firms. Companies such as Canon, Universal Music Group, Spotify, the British Council, Mauritius Commercial Bank and Warner Music Group are among those using managed office solutions in Nigeria.

“The presence of global corporates in this segment challenges the idea that flexible offices are only a stopgap for startups. What we are seeing is a broad-based shift in how organisations of all sizes think about workspace,” Uche said.

The Fortren report is based on proprietary data tracking more than 1,000 corporate occupiers and over 130 flexible workspace operators over a three-year period, making it one of the most detailed examinations of Nigeria’s furnished office market to date.

Beyond mapping supply and demand, the study examines what the rise of managed offices means for landlords, operators and investors. For landlords facing prolonged vacancy, managed offices may offer a counter-cyclical strategy, though one that increasingly requires collaboration with operators rather than traditional leasing structures.

“Landlords who continue to view flexibility as a temporary concession risk missing the bigger picture. The next phase of the office market will be shaped by partnerships and operating models that recognise space as a service,” Uche said.

As Nigeria’s economy shows early signs of stabilisation following recent reforms, the report suggests that occupiers are unlikely to revert to pre-2016 real estate strategies. Instead, flexibility is becoming embedded in long-term operating models.

The future of the office market will not be determined by how much space is built. “It will be determined by how intelligently that space is delivered, operated and consumed.

SENIOR ANALYST - REAL ESTATE

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