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Nigeria’s Office Vacancy Rate Records Downward Trend

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  • Nigeria’s Office Vacancy Rate Records Downward Trend

Vacancy rate in A-grade office buildings across the country is going down, a new report on the real estate sub-sector says.

According to the report, Office Market Viewpoint in Q4 2018 by Broll Nigeria, vacancy rates in A-grade buildings in Ikoyi and Victoria Island, which have the highest rate, are currently down by 59 per cent and 54 per cent, respectively.

Broll stated that in 2018, landlords were increasingly sensitive to the existing oversupply of stock in the market and as such strategic leasing options had to be devised in order to attract tenants to their buildings.

It stated that these leasing options included attractive financial incentives such as extended rent-free periods as high as 12 months, longer beneficial occupation periods of six months and tenant fit out allowances of as high as $400 per square metre.

“Therefore, although asking rentals remained constant for much of 2018, net effective rents (base rents net of incentives) fluctuated below asking rents.

“The median average asking rent for A-grade offices in Ikoyi remained constant at $750 per square metre per annum in the fourth quarter. In the Victoria Island commercial node, the median average asking rent also remained fairly constant at $650 per square metre,” it added.

The report said 2018 saw a significant amount of activity relative to the previous year, especially as the economy emerged from recession and moved towards a path of recovery.

It added that the level of enquiries for office space also increased in the year under review with a more diverse profile of tenants in the tech, finance, oil and gas, FMCG, aviation and pharmaceutical industries.

“In the quarter under review, occupiers with longer term horizons continued to enhance their presence in the market with a number of signed leases being for more than 1,000m², which deviates from the smaller-sized office transactions in previous years. Approximately 14,500m² of A-grade space was taken-up in the Ikoyi market in Q4 of 2018 alone,” the report said.

“This move by investors occurred irrespective of the elections scheduled to take place in February 2019, highlighting less risk aversion to the aftermath of the elections relative to the previous electoral cycle of 2015,” it added.

According to the report, 2018 also witnessed a slight evolution of occupier requirements for lease acquisitions while an increased number of tenants have started looking at flexible, serviced office options, especially small scale new entrants seeking flexibility to either expand or exit the market as and when required.

It explained that co-working space requirements also rose and service operators were operating at full or near full capacity, adding that service providers, primarily local providers, operating in standalone converted residential properties or B- to C-grade office buildings.

Key factors to watch in 2019 and their potential impact on the office market, according to the report, include oil prices and the local currency, among others.

“The outlook for oil prices is one embedded in risk, and a possible devaluation in the local currency by year end could introduce transactionary risk impacts in the form of increased occupational costs within malls as well as higher product prices for retailers if goods are imported,” it added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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