Families, businesses move to cheaper locations as economy bites

A natural but painful displacement in home location  is confronting many Nigerian families and companies, forcing them to move to smaller apartments in the hinterland, as costs rise and incomes shrink or disappear altogether, on the back of the recession currently bedeviling the economy.
This need to relocate comes with myriad challenges, including getting new schools for the children, paying more for transport  and spending longer hours commuting to work or shop, separation from friends, as well as  the stress that comes with driving or commuting long distances on bad roads.
Nigeria is experiencing a cost-push inflation which has taken commodity prices over the roof and many families can no longer afford basic necessities, including house rents. This has led to painful adjustments  in  feeding, as well as location, size and quality of accommodation and quality of schools for the children.
“We have in the past six to 12 months, seen a lot of movement and this cuts across segments of the market. Some families are relocating, while others are downgrading in choice of accommodation. This applies to residential and commercial properties, especially in the high brow locations, such as Ikoyi, Victoria Island and Lekki in Lagos”, says Gbenga Olaniyan, CEO, Estate Links.
The property market, Olaniyan observes, has been struggling within this period with over supply, falling demand, rent default and rising vacancy rate, estimated at 30 percent higher than what it was 12 months ago.
Tayo Odunsi, CEO, Northcourt Real Estate, had however, explained to BusinessDay that the high vacancy rate in the market, which is mostly in the high brow areas, was caused by skewed supply, reduced purchasing power and people he described as legacy landlords, who would rather keep their properties than give them out at prevailing rents or market prices.
Because of the high vacancy rate, rents on properties have come down to a level where people rent properties again and, according to Olaniyan, a landlord has just accepted N6.5 million per annum for a property in Osborne Phase 1, Lagos that was rented out for N15 million three years ago. Olaniyan says people are now being more realistic on both the rental and sales sides.
“Without a doubt, the market has seen movements out of both commercial and residential properties”, says Seyi Madamidola, an estate manager, noting that the emptiness created by people moving out of properties is a clear reflection of the state of the economy.
“People who are moving out of properties are not dying, but settling somewhere else. Offices are shrinking. We had a tenant who was about to sign for a  2,000 square metre space in a new location, but after one year, they came back to us to ask us to rent out half of the 500 square metre space they have been operating from. This is because they have reduced their operations and what this means is that a number of their staff have had to go”, he said.
Madamidola also cited another instance of a company that moved out of a commercial property in Victoria Island into a guest house in the Chevron area, where it is now using the first floor  for offices and the ground floor for residential. “By this action, they have cut the cost of office space”, he said.
In the residential market, a lot of people have downgraded and this is quite evident, looking at apartments between Lekki Phase 1 and Chevron in Lagos Island, which are relatively occupied, as against the heavy emptiness that defines houses in Ikoyi, Victoria Island and Lekki Phase 1.
Olaniyan explained that “people who occupied the N3 million to N3.5 million properties in Lekki Phase 1, have moved down to the Chevron axis to pay N2 million rent. He cites the instance of a tenant who has just relocated from an apartment in Ikoyi, where he was paying $70,000 per annum to a flat where he is paying just N6 million per annum. “What this fellow has done is to leave a more luxurious property to another that is bit ‘cheap’.
The mid-low end market has also witnessed this movement. Areas like Maryland, Omole  Phase 1, Magodo Estate, Ikeja GRA, Surulere, Ilupeju, Ajao Estate, among others, have seen surging vacancy rates that was unusual in such locations sought after by young executives who work in banks and other blue chip industries.
But many of these young executives who worked in banks and other blue chip companies have been laid off and can no longer afford their rents. Some of those who are still at work are not sure of their salaries, leading to high rent default rate.
Some tenants have moved from these mid-income locations where rents range from N2 million to N3 million per annum for a duplex, and N800,000 to N1.5 million per annum for a three-bedroom apartment to areas like Aguda, Ejigbo, Okota, Egbeda, Iyana-Ipaja, Oke Afa, etc where rents are relatively lower at N1million to N1.5 million per annum for a duplex and between N300,000 and N750,000 per annum for a three-bedroom flat.