Introduction
For almost a decade now, what started off as an office alternative for expatriates with short business trips has now grown to a multi-billion-dollar sub-sector within the real estate value chain across the world. Although the co-working space market in Nigeria is still emerging, the sector is expected to grow significantly in the coming years, driven by factors such as Nigeria’s co-working space market demand and the growing startup presence. In this article, we will be discussing some interesting facts that we have found about the co-working space market in Nigeria.
High rental and operating costs are reducing premium office uptake across Nigeria
There are only two premium-grade co-working spaces in Nigeria. One is in Lake Point Towers, located on 4th Avenue on Banana Island. Banana Island is one of Africa’s most expensive neighbourhoods and is generally home to the elite. 989 Workspaces, one of Nigeria’s biggest co-working space operators, took a space in the building in 2021 and has been serving the demand for flexible spaces within the neighbourhood. Lake Point Towers is a two-tower office complex with 14,730sqm of Grade A office space, including cafes/sweet shops and roof gardens. It was developed by Lakepoint Limited in 2016.
The second premium-grade co-working space in Nigeria is operated by Regus, a subsidiary of the International Workplace Group. The company is one of the largest office space operators in the world, with a reputation for providing top-notch commercial real estate services. The space is in Churchgate Towers along the Central Business District of Abuja, FCT. Abuja, being home to the county’s capital, has a sizable volume of diplomats, expatriates and business executives who need a quality flex office to work from.
Generally, except for Lagos and Abuja, where there are a handful of premium grade offices, Nigeria does not boast many top-quality office buildings. For co-working space operators, the high rental and operating costs associated with premium grade offices are also discouraging factors, and in most cases, the demand does not justify this investment.
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Rise in demand for coworking spaces by freelancers and small-scale businesses
In recent years, there has been a rise in the number of startups and SMEs in Nigeria. As of today, Nigeria has the largest and fastest-growing population of startups and SMEs in the African continent. According to Statistica, the number of startups in Nigeria was estimated to have exceeded 3,360 in 2022, representing the highest number in Africa. This was followed by Kenya and South Africa who counted approximately 1,000 and over 660 startups in the same year, respectively. Other key African markets for startups were Ghana, Morocco, Tunisia, and Rwanda.
Except for a few exceptions, startups typically initially bootstrap with limited cashflows. As a result, several of them are often looking for affordable and flexible workspaces where they can pay-as-they-use. Co-working spaces are well-suited to meet this demand, as they can be in convenient locations and offer a variety of amenities at cheaper prices.
Based on our analysis, there seems to be a rapidly surging demand from freelancers and remote workers. Since the pandemic in 2020, there has been a growing demand for global freelance talents. Nigeria has been a major beneficiary of this trend, and Gen Zs and later millennials with in-demand skills are aggressively seeking remote roles from international employers. These freelancers often have more flexible schedules than established businesses and can take advantage of off-peak hours at coworking spaces, which can save them money. In most cases, they may not also be able to afford to rent their own office space. This makes coworking spaces even more alluring to them, as they offer a more affordable option with a variety of membership plans to choose from.
In addition to this, we found that the coworking space market in Nigeria provides freelancers with a sense of community and support, addressing the Nigerian co-working space market demand. This is particularly important for freelancers who work from home and may feel isolated. Based on our interaction with some of the freelancers who occupy coworking spaces across the country, access to amenities and services such as high-speed internet, meeting rooms, and printing and copying facilities are their biggest attractions.
Local businesses dominate occupancy, driven by the growing indigenous entrepreneurial presence nationwide
On the other hand, small-scale businesses in Nigeria form the bulk of corporate occupiers. For these occupiers, factors such as affordability, flexibility, community and amenities emerged as the biggest motivations for choosing coworking spaces over conventional offices. Truthfully, coworking spaces offer a more affordable option than traditional office space, which can be especially beneficial for small businesses that are on a tight budget. Coworking spaces typically charge a monthly membership fee, which includes access to a shared workspace, utilities, and other amenities. Coworking spaces offer a variety of membership plans to choose from, which gives small businesses the flexibility to choose a plan that meets their specific needs. For example, some coworking spaces offer day passes, while others offer monthly or annual memberships. Coworking spaces can provide small businesses with a sense of community and support. Coworking spaces are typically filled with other entrepreneurs and professionals, which can be a great resource for networking and collaboration. Coworking spaces often offer a variety of amenities that can be beneficial for small businesses, such as high-speed internet, meeting rooms, and printing and copying facilities. These amenities can help small businesses save money and operate more efficiently.
According to a report by Emergen Research, Nigerian co-working space market demand is expected to grow from $100 million in 2022 to $500 million by 2027. This growth will be driven by the increasing number of freelancers and remote workers, the rising cost of office space, and the growing demand for flexible and affordable workspaces. The surge in coworking that was exacerbated by the COVID-19 pandemic is creating new opportunities for co-working spaces, as they can provide remote workers with a dedicated workspace and access to shared resources. Although the coworking space market in Nigeria remains relatively fragmented, with a number of small and medium-sized operators, over the coming years, we expect to see more established players starting to emerge.
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