Real estate: Stakeholder gives reasons for slow recovery
….Says Forex affected sector
A primary stakeholder in the real estate sector and President, African Region, International Real Estate Federation (FIABCI), Chudi Ubosi has said that the modest growth recorded in the sector is an indication that stakeholders are beginning to adapt to the realities on the ground.
He allayed fears that the modest growth will not lead to rental price increase and a surge in the price of properties.
“Our firm undertakes and produces a quarterly survey and report on real estate and rental trends. At the end of the second quarter, indications are that there is a modest recovery in the real estate sector.
This recovery is not an indication that rents are rising. No. It is possibly more of an indication that consumers and investors are adapting to the realities of the economic downturn; and have decided that business must go on albeit at a reduced pace.
“Therefore, we are witnessing increased requests for residential property but at reduced rents, especially in the prime locations around the country. Payments are more often limited to one year only,” he said.
Regarding class ‘A’ commercial developments, the demand has been muted despite all the sweeteners that most developers and their estate agents are throwing in to attract tenants. This is understandable as rents for this class of property are denominated in US Dollars.
Retail rents in the malls have remained stable, as shop owners and consumers struggle to come to terms with higher prices for items as a result of foreign exchange rates and availability, reducing purchasing power and lower patronage as a function of a tough economy and environment.
Warehouse rents have remained low and dropping. More and more warehouses are coming into the market for sale and for lease as importation and manufacturing (two major drivers of warehouse space demand) drop.
As to whether there is a link between economic performance and prime rental growth, the answer is – Yes. There is a direct proportion relationship. As the economy improves rents tend to rise and vice versa.
He said that the foreign exchange scarcity contributed in no small measures to the challenges the sector encountered.
“We must all remember that a lot of the prime class ‘A’ commercial development was funded with facilities taken from foreign financial institutions; and so are denominated in US dollars.
A majority of them were commenced when the exchange rate was 160/$. Now, it is 360/$. The future viability of many of these developments will remain in doubt if a refinancing option is not made available to the developers or promoters from their foreign banks.
“Once refinancing is agreed upon and the pressure is taken off the developer, then, rents can readily be further dropped to attract tenants and at least ensure occupancy that will begin to generate an income stream and show cash flow both to the financiers and the developers,” he added.
