Landlords take bashing from economy

Property owners, especially in the residential sphere, are taking a bashing from the economic slowdown which is affecting the incomes of companies and households.

BusinessDay checks reveal that landlords in locations across the country are contending with empty buildings vacated by tenants who can no longer afford the rents.

Before now, high vacancy rates were only commonplace in highbrow locations, where there has always been an over-supply, and where only a small percentage of those who need housing can afford the rent.

“That is today an old narrative because vacancy rate is now high, even in mid-income or middle class settlements. This is not however for the reason that demand has dropped but rather, people can no longer afford the rents”, Ogini Ayeni, an estate manager, confirmed to BusinessDay in a telephone interview.

Ayeni made example Surulere, Ilupeju, Gbagada, Ajao Estate (all in Lagos) where the number of unoccupied buildings is growing by the day. He pointed out that in almost all of these locations, landlords have dropped rents by 10-20 percent, yet they have a hard time finding tenants.

“We were living in a duplex which doubled as our office before now. Our last rent there was N1.6 million per annum.  Since we left that house, for almost a year now, it has been empty. The landlord has dropped the rent twice from N1.6 million to N1.5million, and from there, to N1.4 million, yet nobody is taking it up”, Charity Omeni who lives in Ajao Estate told BusinessDay.

Omeni who now lives in a three-bedroom apartment, added that same size apartments in the same location, which she rented for N800,000 are now readily available for N600,000. She observes that  despite the drop in rents, tanants are still hard to find.

“People want to rent because they need houses to live in, but the way the economy is today makes it difficult for them to do what they want to do”, she lamented, hoping that “it will be well”.

In the high-income settlements, vacancy rates are likewise worrisomely high, according to Femi Akintunde, CEO, Alpha Mead Facilities Management. Akintunde adds that the situation is even more dire for serviced apartments.

He explained that the cost of providing these services, or maintaining the apartments has gone up to a point where it is close to the rent paid on those apartments.

  “Real estate service cost today is about 60-65 percent power-related. When power alone takes 60-65 percent of the total service cost, there is a big problem and that puts pressure on the people who are paying for the services”, he said.

He stressed that the economy has been severely impaired and that it is affecting business,  “there are no new developments and demand for existing ones is weak; supply has dropped; cost of services has gone up and people are demanding lower rents”.

Erejuwa Gbadebo, CEO, Cluttons Nigeria, shares this view. Gbadebo says service providers are getting to a cross-roads, where they will be left with no option but to retreat because people are no longer able to pay for their services.

Gbadebo, whose company is in Nigeria to provide professional, international standard real estate services, says the high vacancy rate has put landlords in a very difficult position, where they don’t know whether to maintain an empty building or leave it and risk value depreciation.

CHUKA UROKO