Real estate sector to record modest recovery- Report

A report, The Broll Sub-Saharan Africa Snapshot 2017, has predicted that the real estate sector in Nigeria is expected to record modest growth, as the country climbs out of recession.

The Snapshot, which is a half-year overview for both investors and occupiers in the sector, contains overviews of the economy, as well as the industrial, office and/or retail markets in Nigeria.

According to the report, in the first half of 2017, no new office deliveries were recorded, however around 52,000m2 of A-grade office space is expected to be delivered to the core markets of Ikoyi and Victoria Island, South west Nigeria, over the next 6 to 12 months.

Specifically, relocations by corporate from B-grade and standalone buildings to better quality space in A-grade buildings in Victoria Island and Ikoyi remained a key theme in the first half of 2017. These relocations continued to be driven by more favourable leasing terms in the market as a result of the vacancies in recently delivered buildings.
Throughout the first half of the year, there was also resurgence in demand for larger office spaces in the occupier market. Whilst smaller office requirements of 200m2 to 500m2 held sway, enquiries and transactions for spaces exceeding 1,000m2 were noted in the core markets of Ikoyi and Victoria Island.

The snapshot noted that the new forex window opened by the Central Bank of Nigeria, CBN, for investors is also expected to revive some confidence, as landlords are now able to carry out dollar-based transactions and meet other financial obligations much easier. As some landlords look to benchmark their rents with the rates offered on the forex window, rents, which are quoted in dollars, but paid in naira might trend higher as this window offers a devalued naira rate.

For the industrial market, Broll stated that there is a significant mismatch between the demand and supply of stock in the market, but increased activity in the industrial sector will hinge on sustainable policies to revive the industrial and manufacturing base of the country.

This would be strengthened by investment into adequate attendant infrastructure (roads, rail, ports, power, etc.) that can lead to the repositioning of the sector. Whilst the current government’s plan to diversify the economy and reduce the country’s dependence on imports is a step in the right direction, the full impact on the industrial sector would be better determined over the long-term.

Babajide Okeowo