The prime residential apartment segment of the Nigerian property market where apartments’ sale prices start from N100 million, an equivalent of $600,000, has continued to suffer from a supply overhang built up during the economic recession of the past few years.
This segment of the market is also experiencing subdued demand arising mainly from the withdrawal of traditional sources of demand, particularly the international oil companies who, with new focus on offshore assets, have reduced staff numbers and housing requirements.
There is, however, increased activity in the middle and lower income housing market with great expectations from the newly launched Nigerian Mortgage Refinance Company (NMRC), according to MCO Real Estate, a research and consultancy firm focused on real estate investment and advice, in its third-quarter 2014 real estate market report.
Omorinsola Ipaye, chief executive officer, K.Parkwood Property Services, confirmed to BusinessDay that there is an over-supply in this segment of the market.
“The residential market is saturated because here, there are many players. Everybody is concentrating on the upper-end and the middle-income market, and because this is a narrow market, you can always expect over-supply,” Ipaye said.
But in spite of this, Munachi Okoye, managing director, MCO Real Estate, pointed out that the opposite end of the market, that is, the low to middle housing market, has benefitted from rising incomes and an increased ability of people in this class to move from rented to owned houses.
It is, however, a different kettle of fish for the commercial segment of the market where institutional investors’ interest has remained very strong in the office space, retail and the hospitality sectors.
Prime rents in these sectors have remained as high as $1,000 per square metre for commercial office, about $900 per square metre for retail space, while room rates for prime hotels range from $300 to $500 per night.
“The re-basing of Nigeria’s GDP leading to its identification as the largest economy in Africa has put the country on the map as the foremost investment destination for international capital seeking exposure to the African markets. This has led to increased interest from international real estate developers seeking to gain an entry to the market,” Okoye said.
She said that vacancy rates in office spaces were down while interest for Grade A office spaces was up.
“There is also a strong supply pipeline of high quality office spaces coming on to the market through 2015 into 2016. With prime rents currently at $1,000 per square metre, this will ensure rents remain stable,” she added.
Gbenga Olaniyan, CEO, Estate Links Limited, attributed the high demand for commercial estate over and above residential apartments to Nigeria being a trading economy.
The Lagos market will in the next 12-18 months receive over 150,000 office spaces coming from a number of Grade A office buildings at various stages of construction including The Wings, Waves, Civic Centre Towers, The Heritage Place, among others.
The Wings, a twin-tower office complex rising 15 floors and touted to be Nigeria’s first Grade A office building, will be offering approximately 27,000 square metres of lettable office spaces with international specification.
This project sponsored by RMB Westport, Standard Bank Group, and Oando plc and estimated to cost $182 million on completion presents a new proposition in office space development in Nigeria, being one of the only two LEED-compliant green office buildings in Nigeria.
Michael O’ Malley, a director at RMB Westport, told BusinessDay in Lagos that on delivery, the complex would provide clients with 21st century state-of-the-art facilities that will enhance the use of space in an innovative way, giving them an optimal day-to-day functionality, whilst retaining attention to detail, comfort and service that reflect business standards.
Okoye further noted that the retail market had also been quite upbeat. She pointed out, however, that since the development of the Palms Shopping Mall in 2005, the renovation of the Adeniran Ogunsanya Shopping Mall in 2011 and the opening of the Ikeja Mall in 2011, there had been no additional delivery of a large modern shopping mall in Lagos to date.
“One step below the level of large modern malls, the retail revolution is powering ahead with numerous smaller mall developments securing land, gaining planning permission, undergoing construction and becoming fully let over very short timeframes,” she said.
CHUKA UROKO
