abesha
February 9th, 2010, 08:48 PM
An old, but relevant article. Clearly, in spite of the boom in high-rise construction over the past decade, there's a big shortage of office space, retail space and residences. Buildings are still u/c when the spaces get rented out.
Out of Office Space?
Tuesday, 15 July 2008
The growth of the construction sector in Addis Ababa has been an issue of focus in recent years as the city is being built at a very fast pace surprising many. “The boom in the construction industry in Addis Ababa and its share and effect on the economy and life of the city is not an issue for a debate as it is something everybody is feeling,” Muluken Yewondwosen, a construction journalist for the Amharic engineering monthly ‘Mendek’ newspaper says. The sector is indeed proceeding at a torrid pace erecting all types of buildings for different purposes ranging from apartments to hotels, offices to malls and more with dramatic frequency. So why is it so difficult to find vacancies for rent that can be used for office space? It is a difficult question Muluken says, and requires research to understand the dynamics in the industry in order to be answered.
Dr. Engineer Abebe Dinku, an associate professor at the AAU Technology faculty says that Addis Ababa is growing modern and in the coming few years it is going to have more land marks giving the city a better and beautiful look. The former dean of the engineering faculty says that vertical growth can solve problems related to the shortage of residential and office space the city is facing right now. At the moment though, it does not look like the fast pace of commercial construction is keeping up with the growing demand in the metropolitan area for office space.
Growing Pains
While it is true that there is a growing number of new businesses in the city, it seems like the growth and expansion of existing businesses takes the lion’s share of the burgeoning demand for commercial space. In particular, international and regional bodies, civil societies and the growing financial and service sectors are at the top of this list of expanding entities. Private business and government offices which used to operate in limited places everywhere in the city are also heading up to modern buildings in many cases abandoning the residential quarters they used to previously occupy. Some businesses are demolishing their previous facilities in favor of constructing modern facilities instead. Many offices and service providers like financial institutions , restaurants and others are expanding by opening new outlets for their business and it is not unusual to find businesses with no less than 3 or 4 locations in the city. Cafes like Kaldi’s and Denver Café are good examples to prove this point having four or more locations in different buildings throughout the city.
The city is unofficially dubbed as the third most important diplomatic city in the world behind New York and Brussels with more than a hundred embassies and major international institutions like the AU UNECA and others. Following the lead of many businesses which are doing the same, some Embassy chanceries are moving into commercial facilities from the villas which they normally used to operate in. In fact, this continuing movement of businesses out of villas and into commercial properties may be responsible for a softening of the residential housing rental market that many observers currently perceive. For example the chanceries for the Portugal Embassy (Dembel), Japan (Sunshine) and the British Embassy Visa section (Saay Building) are all to be found in such spaces. International and development organizations such as UNICEF and GTZ are also major commercial tenants in the city with GTZ for example, occupying 4+ floors of the newly completed addition to the TK Building on the very tip of Bole in addition to other major facilities it has in the city including German House in Kazanchis. Addis has one of the highest concentrations of diplomatic missions as well as international organizations of the types mentioned above and this contributes greatly to both the demand and high cost of securing commercial office space in the city.
New Businesses Push Demand Higher
Here we should not forget that the expanding economy is attracting new people and companies both local and abroad who are looking for office spaces. In 2007, 2,837 businesses were registered in Addis Ababa proper alone and even though it is difficult to determine how many of them occupy space in commercial buildings, it is clear that this is a contributory factor to the surging demand. Although Thewodros Mekonnen a researcher at the Ethiopian Economists Association agrees with the above analysis that the growth of existing businesses is contributing greatly to the demand for office space, he equally emphasizes the economic expansion and new actors joining the market. Thewodros says that the economic growth in the past few years has a lot to do with the expansion of existing businesses in Addis Ababa. He also says that government institutions like the Ethiopian Telecommunications Corporation and others are also big tenants beside the growing number of new cafes and restaurants that can be found on every building. He says that most of the buildings being built in Addis Ababa are modern which raises the construction cost and it is the tenants who pay the price. He said that sometimes the cost-finance value may not match the businesses which are renting these expensive offices on the new modern buildings.
Securing your space
Part of the difficulty of finding office space relates to the lack of any centralized listing services which force many prospective tenants to practically visit every office building they can think of or talk to a myriad of delalas who may do the same on their behalf. Just because a building is brand new, don’t assume that it will automatically have vacancies.
In fact, many new structures are rented out well before their actual completion. If by some chance you are able to have a few different options for renting your desired facilities, you would do well to consider some important factors in making your final decision. The general location of the building will obviously have a big impact on its desirability but increasingly, traffic around the area of office buildings is also becoming a factor. Bole Road may be the hottest place for a commercial building to be located but tenants are becoming concerned about the traffic situation on that road. Renting the perfect office space in the perfect location may not do you any good at all if neither yourself nor your clients can park your cars nearby. You will generally find that lease prices go up the lower your office space and significantly so if you have external exposure towards a main road. If weathering power interruptions is important to you, it is of course highly recommended that you seek out a building with an onsite (and automatic) generator and if your office is going to be on a higher floor, sufficient elevator service as well.
If you find a space that combines the optimal combination of all the above factors, be prepared to pay the price. Although you can find office space starting at around 50 ETB per square meter in some parts of the city, a premium location with some of the desirable amenities will most probably cost you 80-120 ETB per square meter. If you want nothing but the absolute best with no compromise on any of the determinants for lease rates, then you may find yourself paying 180 ETB per square meter and above for the required spot. And since most leases are paid at least 6 months in advance, you’d better make sure you include a healthy amount for this purpose in your initial capital budget.
http://www.horizonethiopia.com/index.php/The_Real_Estate_Issue_-_May/Jun/Business_and_Development/Out_of_Office_Space_.html
Out of Office Space?
Tuesday, 15 July 2008
The growth of the construction sector in Addis Ababa has been an issue of focus in recent years as the city is being built at a very fast pace surprising many. “The boom in the construction industry in Addis Ababa and its share and effect on the economy and life of the city is not an issue for a debate as it is something everybody is feeling,” Muluken Yewondwosen, a construction journalist for the Amharic engineering monthly ‘Mendek’ newspaper says. The sector is indeed proceeding at a torrid pace erecting all types of buildings for different purposes ranging from apartments to hotels, offices to malls and more with dramatic frequency. So why is it so difficult to find vacancies for rent that can be used for office space? It is a difficult question Muluken says, and requires research to understand the dynamics in the industry in order to be answered.
Dr. Engineer Abebe Dinku, an associate professor at the AAU Technology faculty says that Addis Ababa is growing modern and in the coming few years it is going to have more land marks giving the city a better and beautiful look. The former dean of the engineering faculty says that vertical growth can solve problems related to the shortage of residential and office space the city is facing right now. At the moment though, it does not look like the fast pace of commercial construction is keeping up with the growing demand in the metropolitan area for office space.
Growing Pains
While it is true that there is a growing number of new businesses in the city, it seems like the growth and expansion of existing businesses takes the lion’s share of the burgeoning demand for commercial space. In particular, international and regional bodies, civil societies and the growing financial and service sectors are at the top of this list of expanding entities. Private business and government offices which used to operate in limited places everywhere in the city are also heading up to modern buildings in many cases abandoning the residential quarters they used to previously occupy. Some businesses are demolishing their previous facilities in favor of constructing modern facilities instead. Many offices and service providers like financial institutions , restaurants and others are expanding by opening new outlets for their business and it is not unusual to find businesses with no less than 3 or 4 locations in the city. Cafes like Kaldi’s and Denver Café are good examples to prove this point having four or more locations in different buildings throughout the city.
The city is unofficially dubbed as the third most important diplomatic city in the world behind New York and Brussels with more than a hundred embassies and major international institutions like the AU UNECA and others. Following the lead of many businesses which are doing the same, some Embassy chanceries are moving into commercial facilities from the villas which they normally used to operate in. In fact, this continuing movement of businesses out of villas and into commercial properties may be responsible for a softening of the residential housing rental market that many observers currently perceive. For example the chanceries for the Portugal Embassy (Dembel), Japan (Sunshine) and the British Embassy Visa section (Saay Building) are all to be found in such spaces. International and development organizations such as UNICEF and GTZ are also major commercial tenants in the city with GTZ for example, occupying 4+ floors of the newly completed addition to the TK Building on the very tip of Bole in addition to other major facilities it has in the city including German House in Kazanchis. Addis has one of the highest concentrations of diplomatic missions as well as international organizations of the types mentioned above and this contributes greatly to both the demand and high cost of securing commercial office space in the city.
New Businesses Push Demand Higher
Here we should not forget that the expanding economy is attracting new people and companies both local and abroad who are looking for office spaces. In 2007, 2,837 businesses were registered in Addis Ababa proper alone and even though it is difficult to determine how many of them occupy space in commercial buildings, it is clear that this is a contributory factor to the surging demand. Although Thewodros Mekonnen a researcher at the Ethiopian Economists Association agrees with the above analysis that the growth of existing businesses is contributing greatly to the demand for office space, he equally emphasizes the economic expansion and new actors joining the market. Thewodros says that the economic growth in the past few years has a lot to do with the expansion of existing businesses in Addis Ababa. He also says that government institutions like the Ethiopian Telecommunications Corporation and others are also big tenants beside the growing number of new cafes and restaurants that can be found on every building. He says that most of the buildings being built in Addis Ababa are modern which raises the construction cost and it is the tenants who pay the price. He said that sometimes the cost-finance value may not match the businesses which are renting these expensive offices on the new modern buildings.
Securing your space
Part of the difficulty of finding office space relates to the lack of any centralized listing services which force many prospective tenants to practically visit every office building they can think of or talk to a myriad of delalas who may do the same on their behalf. Just because a building is brand new, don’t assume that it will automatically have vacancies.
In fact, many new structures are rented out well before their actual completion. If by some chance you are able to have a few different options for renting your desired facilities, you would do well to consider some important factors in making your final decision. The general location of the building will obviously have a big impact on its desirability but increasingly, traffic around the area of office buildings is also becoming a factor. Bole Road may be the hottest place for a commercial building to be located but tenants are becoming concerned about the traffic situation on that road. Renting the perfect office space in the perfect location may not do you any good at all if neither yourself nor your clients can park your cars nearby. You will generally find that lease prices go up the lower your office space and significantly so if you have external exposure towards a main road. If weathering power interruptions is important to you, it is of course highly recommended that you seek out a building with an onsite (and automatic) generator and if your office is going to be on a higher floor, sufficient elevator service as well.
If you find a space that combines the optimal combination of all the above factors, be prepared to pay the price. Although you can find office space starting at around 50 ETB per square meter in some parts of the city, a premium location with some of the desirable amenities will most probably cost you 80-120 ETB per square meter. If you want nothing but the absolute best with no compromise on any of the determinants for lease rates, then you may find yourself paying 180 ETB per square meter and above for the required spot. And since most leases are paid at least 6 months in advance, you’d better make sure you include a healthy amount for this purpose in your initial capital budget.
http://www.horizonethiopia.com/index.php/The_Real_Estate_Issue_-_May/Jun/Business_and_Development/Out_of_Office_Space_.html