Cause & Effects: Impact of Recent Vandalisations on Property Investment and Development

Background

The youth of Africa’s largest black nation, Nigeria had entered into the second week of peaceful protests against police brutality and extra-judicial killings that had gone on for years. The Special Anti Robbery Squad (SARS) had been accused of ‘wasting’ this demographic for owning laptops, having braided hair and driving cars they were too young to afford (in the estimation of the accusing officer of the day). The Nigerian army would eventually show up at the Lekki toll on the 20th of October to end the protests.

Post 20-10-2020 Carnage

Nigeria’s 36 States: Looting Map & Analysis

Source: Northcourt
In the ensuing bedlam, hoodlums took to looting and destroying commercial centres, police stations and correctional facilities in leading cities. Business owners could only look on as assets were looted. Insurance claims are expected to be in the billion naira range. Calabar discount mall, First bank, Access bank and Ecobank offices and over 60 public and private buildings we vandalised in Cross Rivers state. The Lagos state government has estimated that ₦1Trn will be required to rebuild.

Source: Northcourt

Capital nursery/primary school, Technical College Yola, 110 tractors and farm implements were looted. Ogun state’s Asero farmers market and Osun’s Justrite mall were also vandalised. Access and First Banks, Industrial Training Fund’s office & the newly built National Immigration Service office, the National Identity Management Commission office, and shops in the Emene axis of Enugu state were vandalised. High value medical equipment were either looted or vandalised at the Kogi Central Medical Store. The Plateau State Government lost 22 facilities while Clear Estate in Abuja reportedly lost assets in excess of ₦100M. Adamawa state was no different, losing vehicles, earth moving equipment and buildings worth over ₦250M.

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Mobility Review

Google measures mobility by tracking people’s movement to different locations (and time spent at these locations) over time using data sourced from connectivity to Google apps. Residential mobility peaked on the 22nd with an increase in movement and retail mobility for the period under review recorded the most decline on the 22nd of October with a -70% decline. Workplace mobility remained deep in negative territory.

Likely Short, Mid and Long Term Impacts

Short Term (Present to 6 months)
These disruptions will understandably create negative consumer sentiments, at least from a real estate perspective. The extent of carnage in many locations has created enough potency to guide the evolution of the development market towards more security conscious expressions. Land investments will remain resilient, solidifying its role as a sturdy investment. There are five possible directions in the short term:

Flee: Capital flight may occur as investors liquidate real estate holdings and move to safer climes, relocate to western cities and pause on investing in Nigeria’s real estate market. There will also be a clear reduction in lease transactions which is a proxy for in-country relocations.
Security: Higher security votes represent the logical and responsible thing to do under the circumstances – this can be expected in both public and private quarters.
Renovations and remodelling: This will be a critical discussion point for market players who want to ride out the current storm. There will be the need to rebuild, and most likely to higher standards.
Insurance shakeup: The long-awaited consolidation of the insurance industry may just have received a much-needed shove. There will be higher claims and potential busts.
Fight: There will be optimistic and bullish investors who choose to pick up cheaper assets which promise super-normal yields in lieu of higher risk premiums

Mid Term (1 – 3yrs)
In the medium term, real estate professional services providers will be required to provide fit to purpose advisory and valuation services. In the mid-term, we see the following:

Community living: There will be greater emphasis and demand for residences within gated estates.
Security firms: It is apparent that there exist opportunities for new businesses in the security field.
Local investment: In the mid-term, it is expected that there will be a rise in local investment in commercial real estate to fill the gaps left by foreign investors who have repatriated their capital.
Proptech: As seen in other sectors since the emergence of COVID-19, many will turn to new technology to leapfrog far-reaching and expensive difficulties created by the vandalizations.
Development activity: Reconstruction and remodelling of public and private assets destroyed by the vandalisations will create a significant buzz in development activities across the country.

Long Term (3yrs+)
State actors may have to recognise circumstances of the protest for the existential threat that it truly is and roll out effective social and economic programmes in partnership with the private sector. Investment in healthcare and education infrastructure and should be addressed on a more sustainable basis. Our long term projections are:

Political and Economic performance: This will influence/determine the return of foreign capital. With the presidential elections coming up in 2023, much of economic policy will hang in the balance until objectives are announced.
Redefined retail real estate market: Leisure and entertainment, sale of local goods; indoor sports, health, safety and security will be high priority.
Reconfiguration of offices: It is projected that a good number of office blocks will become multi-use; having residential, retail and leisure embedded. This is to allow for good property optimization
Industry collaboration: Key players in the Nigeria real estate market will arrive at more reasons to collaborate in building a more resilient real estate market.
Conclusion

The vandalisation events that took place after weeks of peaceful EndSARS protests will evidently generate immediate, mid and long-term sentiments and responses as detailed in this report. A central theme that is reinforced with regards to property investment and development is the case for added security, property insurance and enhanced risk assessments. But perhaps the argument for economic reforms and reductions to inequality will move up in priority of stakeholders and power brokers. Should this happen; the fears or fights these drastic events have heralded will lose hold.

Developers, financiers and property investors will return to their strategy rooms with a single aim to generate deft ideas that reverse any losses suffered. This may infer exiting positions at some point, but may also be a demand for higher yields based on upwardly reviewed risk premiums. A positive conclusion to note is that reconstruction and remodeling activities are poised to increase the sectors activities in seasons to come.