Foreign developers shift focus to commercial properties on back of market realities

A combination of increasing demand and the limited supply of modern retail and grade ‘A’ office space is compelling foreign real estate developers to shift their focus to the commercial segment of the property market.

The developers, who traditionally deliver luxury residential properties for the super rich, industry analysts say, are responding to current market realities and feasting on a hugely under-tapped market.

Encouraging demographics, the re-emergence of the middle class with strong spending power and an extremely healthy growing consumer culture are driving a new retail revolution in Nigeria, consequently creating an opportunity for the development of retail malls.

Likewise, an increased demand for prime office space from international investors, comprising mostly of property fund managers seeking a foothold in Nigeria’s commercial real estate market, has prompted the construction of several top grade office spaces.

A close observation of the property market in the past one year clearly shows a burning desire by these investors to fill these gaps with the construction of prime grade office space in Lagos and retail malls in second tier cities such as Warri and Benin.

“The shift to the commercial segment of the market by foreign real estate developers was primarily occasioned by the lull in the high-end residential market, where they usually played,” Maureen Orazulike, regional director, Century 21, a real estate consulting and marketing firm, told BusinessDay in an exclusive chat.

Orazulike explained that with most luxury flats experiencing high vacancy rate and developers unwilling to down prices, the investors saw the commercial segment of the market as the new cash-cow of the property market.

Investigations by BusinessDay reveal that in Ikoyi alone, about six new projects, mainly commercial office space, rising 13 to 15 floors, with gross buildable areas (GBA) ranging from a minimum of 7,500 square metres to 19,500 square metres have gone off the ground.

Within this location, are office space projects at various stages of construction, including Kingsway Towers by Glover Road in Ikoyi, Lagos, a commercial office space development that will rise 15 floors on 15,000 square metres of land, and just close to it is the BAT Rising Sun opposite Ikoyi Club.

This is a mixed use development that sits on 19 square metres, holding promise for 13 floors, out of which four will be used for office space. By Lugard and Kingsway Avenue junction is the Heritage Place, another commercial development that will rise 14 floors on 15,600 square metres, while Sogenal Towers, a mixed use development located beside the Mercedes Place, occupies 7,500 square metres and will rise 15 floors.

“We are extremely confident of the growth potential in Nigeria’s economy and that informs investment decisions,” Hein du Plesis, project manager, Lekki Mall told this reporter in an exclusive interview.

Plessis, who is part of the team that oversees Novare Africa Property Fund, a Mauritius domiciled private equity fund, which has South African pension funds as investors in Nigeria, is confident that despite the recent economic headwinds, the dynamics driving the growth of the commercial segment of the real estate market is still very active.

Citing an example with the Federal Capital Territory (FCT), Abuja, Hein noted that while the city has seen some significant growth in retail space offerings over the past two years, there is still an immense opportunity for savvy investors.

“Abuja is still under-supplied with retail facilities when compared to its contemporaries in other parts of the world

“Any other global city will already have exponentially more retail offerings, given the size of the population, as well as the size of the potential consumer spending,” he said.

Affirming this claim, Michael O’Malley, founding partner of RMB Westport, a real estate investment management and development firm, focused on creating top class developments in high-yield geographies in sub-Saharan Africa, in an earlier interview with this reporter, was positive that despite recent economic challenges Nigeria remains the choice destination for most international tenants (retailers).

O’Malley’s firm, RMB Westport, is upbeat with the construction of a new imposing twin-tower office complex rising 15 floors and a retail facility branded Circle Mall, all in Lagos.

ODINAKA MBONU