Oil's Slide Drives 50% Drop in Angola Capital Office Rents

(Bloomberg) -- The cost of renting an office in the Angolan capital Luanda has almost halved in two years as a slide in oil prices damages what had been one of Africa's fastest-growing economies.

More than 20 percent of new office buildings in the city are empty, and there's also oversupply in the Nigerian centers of Lagos and Abuja, Knight Frank LLP said in a report. While oil-exporting nations are suffering, some of the smaller east African economies such as Tanzania have seen their real estate markets benefit from the drop in crude, with rents in Dar es Salaam relatively high and vacancy rates low, according to the consultancy.

“There has been a divergence between the growth rates of commodity importing and commodity exporting countries since 2015,” said Peter Welborn, the London-based head of Knight Frank's Africa unit. “Falling oil prices have had a dramatic impact on Angola. Luanda still has the highest office rents in Africa, but demand has virtually ground to a halt.”

Investors who flocked to Africa to take advantage of the world's fastest-growing population and an expanding middle class are being forced to reassess the continent's potential following crude's more-than 50 percent drop since mid-2014. Nigeria, the region's biggest oil producer after Angola, is in recession, while South Africa -- though a net importer of the commodity -- has been hurt by a mining and manufacturing slump as well as a drought.

Monthly prime office rents in Luanda fell to an average of $80 per square meter this year from $150 in 2015, while rates dropped 45 percent to $33 in Abuja and 21 percent to $67 in Lagos, according to Knight Frank. Johannesburg prices dropped 23 percent, while those in Dar es Salaam held steady.

The Angolan capital is still the world's second most expensive city for expats, after first-placed Hong Kong, according to a cost of living survey by consulting firm Mercer.

Apart from Tanzania, other hot spots in this “multi-speed Africa” include Kenya, Ethiopia and Rwanda, with Ivory Coast and Senegal in the west also benefiting from improved political stability and infrastructure investment, Welborn said.

To contact the reporter on this story: Colin McClelland in Johannesburg at cmcclelland1@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Paul Armstrong, Ross Larsen