A new house rent payment trend is evolving in highbrow areas of Nigeria’s property market, as landlords are now accepting six months advance rent payments from prospective tenants, as against the usual trend of asking for as much as three years.
These expensive areas such as Garki, Wuse and Asokoro in Abuja, and Ikoyi, Victoria Island, and Lekki in Lagos, have in the past 12 to18 months, seen an over-supply of houses for which there is no commensurate demand, leading to high vacancy rates. BusinessDay investigations reveal that in the highbrow areas of Lagos for instance, if there were 500 prospective tenants last year, this year there are about 600, but if there were 800 people building houses for the market last year, this year, there would be over 1,000.
Regarding rental costs in highbrow areas, in Oniru Estate, Victoria Island, for instance, a furnished town house goes for between N3 million and N4.5 million.
BusinessDay had reported high vacancy rates in these areas, quoting Bismarck Rewane, CEO of Financial Derivatives Company, as estimating vacancy rates at between 25 percent and 30 percent in residential areas of Ikoyi and Victoria Island.
Close market watchers say that Asokoro and Wuse areas of Abuja are not any better, explaining however, that the high vacancy rates in these areas are more on account of high pricing than over-supply.
Gbenga Olaniyan, an estate surveyor who is CEO of Estate Links Limited, confirmed to our reporter recently that six months advance rent payment is a new trend in the rental market.
He estimated that five percent of landlords were ready to accept this rent, pointing out that such landlords usually considered the financial standing of the prospective tenants . This is apparently to avoid low networth pretenders from occupying apartments, paying the first six months installment and then living free of charge in the apartments, shielded by prolonged litigations in court.
“This is the new trend. The norm is one year rent but up to five percent of landlords are accepting six months rent. What these landlords do is just to check the background of the prospective tenant, whether he works in a bank with good standing or in an oil company, and has been there for a while,” he said.
He further observed that demand for high-end office spaces is softening, explaining that high service charges are forcing many organisations out of corporate office blocks.
“These days, high-end office blocks tend to stay unoccupied much longer than they used to, and the reason is that many companies now take residential houses, power them with generators and operate from there, in order to cut luxury service costs.”
Continuing, he said, “the monstrous buildings used as office blocks are too costly to keep. By the time you pay your rent in what is called B-grade office spaces where you pay between N50,000 and N55,000 per square metre, you also pay about N15,000 per square metre as service charge”.
Chudi Ubosi, an estate surveyor and valuer, also told our correspondent that the slowdown in the office space market was as a result of some companies downsizing and some others leveraging technology to conduct their business.
“The situation is such that where ordinarily you would have had 1,000 square metres office or shop space, you now have 500 square metres because a number of businesses and offices are now operated from homes”, he said.
He added that a lot of landlords have not realised that rents have dropped, which is why “they are still holding out, hoping to achieve the kind of rent they had five to six years ago”.
Rewane agrees, observing however, that rental values are becoming more realistic as some property owners now factor in economic conditions in their house rent charges.
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