Co-working spaces in African urban centres

The global proliferation of coworking spaces has been remarkable, with estimates reaching 41,975 in 2024, reflecting an annual growth rate of 21.3% from the previous year. This global phenomenon has permeated Africa, underscoring the continent's vibrant entrepreneurial ecosystem and property market. Despite representing a modest share of 1.5% of the global market with small coworking spaces in 2022, Africa is witnessing a significant rise in these innovative work environments. Notably, Nigeria leads with over 100 coworking spaces, establishing itself as a prominent hub, while Kenya follows closely with notable spaces like Nairobi Garage and iHub, collectively hosting over 300 businesses.

Introduction

Co-working spaces provide individuals and businesses with flexible, cost-effective office environments equipped with essential amenities such as desks, meeting rooms, internet access, air conditioners, and additional services like administrative support and event hosting. This article delves into co-working spaces' opportunities and rapid growth in African urban centres, analysing the factors propelling this trend and its implications for the region's business landscape.

Entrepreneurial Boom

Africa has witnessed a significant rise in entrepreneurship, with over 22% of the continent’s working-age population starting new businesses, according to the Global Entrepreneurship Monitor 2020. This entrepreneurial spirit is particularly strong in urban centers, where co-working spaces provide the necessary infrastructure and support. Sub-Saharan Africa has the highest rate of new business creation globally, with approximately 13% of adults engaged in early-stage entrepreneurial activities, compared to the global average of 11%. Countries like Nigeria, Ghana, and Kenya are at the forefront, with vibrant startup ecosystems and a high prevalence of young entrepreneurs.

Freelancing and Remote Work

The COVID-19 pandemic accelerated the shift towards remote work, and Africa was no exception. A survey by the African Union Development Agency in 2021 found that 40% of businesses in Africa adopted remote work during the pandemic. Co-working spaces cater to the needs of freelancers and remote workers who seek a professional environment without the constraints of a traditional office. The Freelancers Union reports that the freelance workforce in Africa is growing rapidly, with platforms like Upwork and Fiverr seeing a significant increase in African users.

Digital Transformation

Improved digital infrastructure, including increased internet connections and mobile connectivity, has made co-working spaces more viable. For example, internet penetration in Sub-Saharan Africa reached 37% in 2023, up from just 7% a decade earlier, according to the International Telecommunication Union. Mobile money services, which have become prevalent across the continent, also facilitate the operations of co-working spaces by enabling easy transactions for membership fees and other services.

Cost Efficiency

For many small businesses and startups, co-working spaces offer a cost-effective alternative to leasing traditional office space. A report by JLL Africa in 2021 highlighted those co-working spaces can reduce office setup costs by up to 50%, making them an attractive option for budget-conscious entrepreneurs and freelancers. The average cost of renting a desk in a co-working space in major African cities is approximately $150 per month with added benefits like shared internet, electricity costs, administration support etc., which is significantly lower than traditional office rents.

Networking Opportunities

Co-working spaces provide invaluable networking opportunities, fostering a sense of community among like-minded professionals. Also, it allows freelancers who may be working on similar projects from different specialties to co-exist and pass opportunities to each other. Events, workshops, and collaborative projects are common in these spaces, facilitating connections leading to business growth and innovation. A survey by Deskmag found that 71% of co-working space members have collaborated with other members on projects, highlighting the collaborative nature of these environments.

High Growth Potential

The African co-working market, although currently small, presents substantial growth potential. According to a 2022 report by the International Finance Corporation (IFC), Africa's co-working market was valued at approximately $200 million, with projections indicating a compound annual growth rate (CAGR) of 20% over the next five years. Increasing urbanisation, a rising entrepreneurial culture, and the expansion of the gig economy drive this growth. Investors can capitalise on this burgeoning market by funding the establishment and expansion of co-working spaces in key urban centers.

Strategic Entry Points in Emerging Markets

Investing in co-working spaces offers a strategic entry point into Africa's emerging markets. Cities like Lagos, Nairobi, and Cape Town are becoming innovation hubs spreading out to other West, East, and South African countries and they attract startups and multinational companies. According to the Global Startup Ecosystem Report 2021, Lagos ranked as the top startup ecosystem in Africa, with start-ups in the city raising over $400 million in 2020 alone. By investing in co-working spaces, investors can gain early access to high-growth startups and innovative enterprises, positioning themselves advantageously within these dynamic markets.

High Return on Investment

Investing in co-working spaces can yield high returns due to the relatively low setup costs and high demand for flexible workspaces. A study by JLL Africa highlighted that co-working spaces could reduce office setup costs by up to 50%, making them an attractive option for entrepreneurs and small businesses. Additionally, the average occupancy rate for coworking spaces in major African cities is above 80%, indicating strong demand. This high occupancy rate translates into steady revenue streams for property investors in the real estate market in Africa. For instance, Workstation in Lagos reported an 85% occupancy rate within the first year of operation, demonstrating the lucrative potential of coworking spaces.

Conclusion 

The emergence of co-working spaces in African urban centres, driven by entrepreneurship, digital transformation, and cost efficiency, reshapes the business landscape. Most cities in Africa have a high demand for such properties which are pivotal in supporting local businesses and fostering innovation. As flexible, affordable, and collaborative environments, co-working spaces are essential to Africa's growing entrepreneurial ecosystem. To ensure their continued impact, stakeholders, including entrepreneurs, policymakers, and investors, must support their growth, contributing to a more dynamic, innovative, and inclusive economic future for the continent.