There is a rapid increase in urbanisation globally. By 2050, 70% of the world population is expected to live in urban cities. In addition, there is an expectation that cities will increasingly become more significant than the actual countries they belong to. If we consider the cities of New York, Boston or LA in the US, Paris, London or Geneva in Europe, Dubai and Doha in the MiddleEast, and even the host of the 2016 Olympics, Rio de Janeiro in Latin America, we begin to understand and agree with this concept. (Let’s not forget Mumbai, Tokyo and Sydney ‘down under’)
The city of Lagos is no exception. Currently housing up to 20 million people, the city is expected to more than double that number by 2050. Clearly, the government will not be singularly able to keep up with the needs of this population. Private partners will be required for financing, development, leisure and entertainment, marketing and advertising to support the infrastructure and everyday needs of the people. Innovating will also be key – as the solutions need to be both cost effective yet ‘new age’ to meet the evolving and modern populace. This innovation, particularly in the real estate space, is already present in the greater Lagos Island neighbourhoods of Victoria Island, Ikoyi and Lekki. Commercial projects such as Wings and Heritage, and retail projects such as the Palms or Circle Mall are all testaments to private companies’ response to urbanisation.
Most of these projects are concentrated in the Greater Lagos Island areas. Key reasons for this include the high cost of financing that requires suitable returns through rents from corporate tenants (in the commercial space) or the purchasing power of the mid to more affluent populace (for the retail space). The need for this unique balance accounts for the location of most of these new projects.
However, urbanisation extends across Lagos to other mainland neighbourhoods such as Festac, Yaba, Oshodi, Apapa, Ikeja, Maryland and Anthony Village. In actuality, the density of the population is arguably more acute in these neighbourhoods than in the Greater Island areas. But the needs remain the same. People need offices to work in and retail outlets to shop in. What is the solution? Again it is innovation – and even more so for a denser population that still has the same needs for modernity in an evolving world. A recent example of such innovation is the ‘Big Black Box’, Maryland Mall that just got unveiled last week. The unique features of the mall addressing the contemporary requirements of the population include the ‘black box’ – an ingenious marketing message similar to the likes of the blue box of Tiffany or the red sole of Louboutins – an image that definitely works for Nigerians! The developers have also included ‘the first’ features – such as the largest LED screen in Sub-Sahara Africa. All of these serve to entice an audience seeking modernity.
Achieving this feat still meant that the delicate balance between cost and returns needed to be maintained. According to Mrs Shola David-Borha, CEO of Stanbic (who were one of the key financiers of the project), urban development is a discipline with four key requirements: First is location – location! Location! Location! It has to be one that shoppers (in this case) can easily find despite traffic issues. Second is the right funding structure – in this case 50%/50% debt and equity mix, as well as the right currency mix (USD vs Naira). Third is the right tenant mix with a well-regarded anchor tenant (Shoprite in this case) and fourth is respecting all the Nigerian regulations in order to minimise project risks. A fifth key element that must be added is assembling the right development team. The developers of Maryland Mall sought to achieve quality and control costs by employing a 100% local team – from the architects, contractors, project managers and designers. They also sought to control their constructing costs through the employment of suitable construction materials and respecting time and budget constraints – contingencies that have been known to add as high as 15-30% additional costs to projects.
Our expectation is to see more and more innovative projects like these that pay attention to the local constraints, yet find opportunities to utilise innovation to combine a creative mix of financing, development and design to achieve an optimal solution.
Chinwe Ajene-Sagna
