Lagos is the Most Expensive City to Live and Work in Africa; Here’s Why It Matters
It’s harder than ever to run a business in Lagos
New York and London have some of the world’s most expensive office spaces, that’s no surprise. These two cities have reputations as global financial centers. What’s a bit more interesting is to find Lagos on the list of cities with most expensive office costs.
Lagos is in the top 20 most expensive cities for startups to rent and occupy office space, (number one in Africa). It is also the 7th most expensive city in the world to live and work in (again number one in Africa).
But maybe if we consider that Lagos is the commercial capital of Africa’s second largest economy (South Africa reclaimed that title last year as the Rand strengthened against the dollar), it’s not such a surprise after all.
On the other hand, the continual weakening of the naira against the dollar has significantly improved Lagos’ affordability for dollar-denominated companies. So while local enterprises continue to struggle with inflation and rising costs of office rents, foreign businesses have their burdens lightened. It would be funny if it wasn’t also heartbreaking.
“Office-based businesses operating in major world cities spend around one-third of their total operating costs on accommodation,” says Yolande Barnes, Director of Savills World Research. This cost accumulates through a combination of commercial rents which are paid directly to landlords, and increased salaries due to the cost of employees’ living accommodation. Fluctuations in these costs inform how convenient it is for entrepreneurs to run a business in cities.
The high office costs is a reflection of the benefits that companies get just from being based in Lagos, like being able to secure more lucrative business, and attracting the best and brightest workers.
A contracting economy means business conditions in Lagos, something that was already responsible for high SME mortality rates, just got tougher. Rising real estate costs means entrepreneurs need to get creative with how they meet their office space needs.
The ray of light comes from the sharing economy which is gradually gaining a foothold in the city. More resource sharing and collaboration between business owners will help keep costs down, reduce risks and increase their chances of succeeding.
There’s no better time to go all in implementing the sharing economy.
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