Property & Real Estate | |
Property & Real Estate | |
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Monday, January 11,
2021 / 06:00PM / Northcourt / Header Image Credit: Northcourt
Summary - World at Home
2020
will be described as the year of unprecedented shifts and shocks. COVID-19 effects
were evident in the economy and real estate markets world over. Crude oil
prices hovered around $42p and employment numbers weakened. And while new
business opportunities opened up, few firms are likely to return to the organisational structures
of 2019.
For a frontier market dependent on oil
revenues, this formed an unwieldy canvass for much
of the year. The $30Trn global
commercial-property market was tested once more as occupiers required
less space understanding that WFH may become
the norm.
The
nation moved from 6th to 3rd in 2019 on Absa's Financial Markets 2020 Index.
One commonality across all funding reports is the rise and domination of
Nigeria as an investment destination. Nigeria is the leading destination for startup
venture capital investment on the continent. But the currency remains a sore
point and manoeuvrings by the CBN, while well-meaning has done little to stem
its.
Police brutality against Nigeria's young demographic
vaulted the country to the international stage as the government
sought to recover from poorly handling peaceful
protests. This brought to the fore recurring
issues in government transparency. The youth would return
to making the most of the Nigeria
economy, contributing
to much of the businesses online. Transactions value
increased from $77Bn in Q2 to $116Bn in Q3 2020.
Big brand hospitality chains saw
bookings drop by over 94% and are unlikely to see
pre-COVID levels until Q3 2021 at the earliest.
There has been no demand for student housing, a
result of the universities' strike over funding
agreements with the central government. It is hoped
that the armistice between the regulators and the lecturers
will be more permanent than in previous seasons. Central business
districts are no longer the undisputed destination for
new developments. Some suburbs are now under strong
consideration as developers are choosing,
as they did in the 2018
recession, to make more research driven decisions. Both retail
and office landlords are changing to remain
attractive. Real estate investment managers are embracing technology
more intently to accurately forecast
performance metrics.
In the latest global report on media
cities by Savills, Lagos comes in at 20th being
the centre of Nigeria's media industry and gaining popularity
both through the Nigerian diaspora
and streaming services.
Nigeria's film industry has made much of the government funding
it's received in recent years and is a key
employer in the Nigerian economy.
Rack Centre will be expanding its data
centre with a $100M investment, creating a
total net lettable space of 6,000sqm. Hyprop
reached an agreement with an undisclosed buyer to
sell its stake in the Ikeja City Mall for $115M,
good news overshadowed only by the fact that
it bought said stake for $155M in 2015. Enquiries for
residential leases have been steady for much of
the year, but more so for an extra room.
Tenants in 1-bed apartments are looking
to add one more room and those in 2 beds are
going for three - possibly to make room for WFH. Buyers appear
more interested in 4 - b e d r o om
apartments, especially
in the city centres. Most prospects now prefer locations that are
either in secure gated communities, a safe
distance from the highways or both.
There is a general shift toward the
local investor as a source of investment. Treasuries
aren't offering attractive rates and well
directed real estate investments are no longer as hard
a sell. The demand for last mile industrial real
estate is expected to grow, a result of the growth
in online retail, logistics and pharma. Healthcare, neighbourhood
retail and residental developments
are posting respectable results,
encouraged by the
schisms in the global supply chain and the added motivations to look
local first. But this forms something of a
quandary for the execution of the recently ratified
AFCFTA. As the vaccines course their way through
some parts of the world in 2021, (Mrs Okonjo
Iweala, the incoming WTO head has assured that
Nigeria will receive the vaccine), the expectation
is that the economy will improve.
Demand for residential leases in secure
gated communities will continue to grow along
with locations a safe distance from major thoroughfares.
The Grade office market will return much different than what it was
before the pandemic - less occupied, not as
pricey. We expect that data centres, cell towers,
power cabins and the like will continue
benefiting from the heightened use of technology. Single
use developments have become a fading
concept.
The projects that will weather the present, and increasingly, the future will be mixed-use, combining residential, retail, office, and healthcare. We suspect that the future of real estate investment management will parallel the evolution of financial services where transparent data platforms were created to support trading assets in capital markets.
Gated Communities to witness increased demand in 2021
Further discourse around the Outlook Report was had on the 6th of January
2021 at the Wheatbaker hotel, Ikoyi Lagos during the Annual Nigeria Real Estate Market Outlook Breakfast meeting,
which brings together industry leaders from diverse fields in the Nigeria real
estate market to discuss investment opportunities for the new year ahead. The
event
The
Nigeria real estate market has had to switch gears. Whether it's the movement
of demand away from Grade A office, retail and big brand hospitality to the
adoption of technology. While pushing the conversation on healthcare,
infrastructure, security and mortgages, more changes have been attempted (and actioned)
over the last 10 months than in the last 3 years.
Within
social distancing restrictions, the event was streamed live where 6 speakers
were present. Sandra Momah, Associate Director, Ernst & Young, Tayo Odunsi
CEO, Northcourt, Temitope Runsewe CEO, Dutum Construction, Funke Okubadejo
Director, Actis and Ayo Ibaru COO, Northcourt who also moderated were available
physically while Olaide Agboola, CEO Purple joined the panel online from the
UK.
Ibaru
kicked off the event with a technical presentation on the performance of Nigeria's
real estate market in 2020 discussing the residential, retail, office,
industrial and healthcare sub-markets. Highlighting the increase in investor
demand for research, and the ongoing projects as a result, the presentation
ended with 3 scenarios for 2021 (Economic recovery, No change and economic
decline) and their effects on the real estate market.
Tope
Runsewe, CEO Dutum Construction discussed the workings of Nigeria's
construction industry from bidding, planning and team selection to executing
and monitoring. He further shared his perspectives on the past and ongoing
construction projects in their portfolio education, retail, hospitality,
aviation, and infrastructure aspects of Nigeria's real estate market. Looking
into 2021, he emphasised the following as key points - growth in the demand for
quality delivery, rise in price of important materials (local suppliers,
backward integration), a rise in the demand for indigenous construction firms
and an improvement in local expert pool due to the return of indigenous experts
with
international experience.
In
panel session of real estate industry players, the panelists from their
practice experience, gave perspectives and nuances resulting those perspectives
to make projections for the new year, 2021 which include: the demand for
residential real estate is expected to increase and gated communities will see
more demand especially for 3 and 4 beds. Mixed use projects with well planned
residential components are projected to deliver above average results. Grade A
office vacancies are expected to increase and those with rentals above $350psm
may find it difficult securing tenants. The pace of
conversions
from residential to office will accelerate.
Industrial
real estate is projected to grow based on sustained online retail and last mile
delivery considerations. This is expected to drive infrastructure development.
Hospitality's growth will depend on the release of a vaccine for Nigeria and
the degree of innovation as pivoting to allied services. Land is expected to
remain a resilient store of value and continue to attract investment.
For
enquires and comments regarding the report, kindly contact Ayo Ibaru via ayo.ibaru@northcourtrealestate.com
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