Economic and policy uncertainties as well as foreign exchange volatility have combined to slow transactions in the luxury segment of the rental markets in Nigeria’s highbrow locations, realtors have said.
The realtors added that these factors, responsible for the low demand from expatriates and multinational companies, have contributed to a decline of around 10-20 percent in rental prices within the market over the past year, leading to an increased number of unoccupied buildings.
Ikoyi, for instance, more than any other market node, has taken a beating and this is evident in many locations in that axis. A walk through many streets and avenues in this highbrow location shows many of the buildings empty as could be seen on Bank Street, off Mobolaji Johnson Street.
Confirming this to BusinessDay in a telephone interview, Udo Okonjo, global CEO/VC of Fine and Country West Africa, added that the sales market has also experienced a shift, with property prices showing a varying trend, depending on the location and type of property.
“Sales volume has seen a decline of approximately 20-25 percent compared to the previous year, reflecting the broader economic dynamics. In other luxury markets such as Victoria Island and Lekki, the situation varies, with certain segments showing resilience amid economic shifts,” Okonjo said.
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She also noted, however, that prime commercial properties in Victoria Island have maintained relatively stable rental rates due to their strategic locations and demand from local businesses.
Though Gbenga Olaniyan, CEO of Estate Links, differs slightly with Okonjo on the state of the rental market, saying that the market is still strong. He nonetheless attributed the slow transaction to the instability in the foreign exchange market which has made naira transactions unattractive.
He said: “This market is still strong for people who have a strict naira perspective. For example, someone who has $100,000 as his rent payable in naira. Traditionally, most multinational companies will not recognise the black-market exchange rate. So, they will pay you the official naira rate.
“As at last year, the $100,000 rent was about N45 million because it was N450/$ at the official rate then. Now that the official rate itself has moved to N780/$, it means that $100,000 rent is now N78 million.”
He explained that someone who was paying N45 million, which is the equivalent of $100,000, is saying that he cannot pay N78 million rent. So, he is negotiating to get N60 or N55 million instead and that, at this rate, he can only get $80,000, meaning that rent in dollar terms is going down.
Olaniyan does not believe that most residential buildings in Ikoyi are unoccupied, insisting that even though supply keeps increasing, most properties that have realistic rents are actually occupied.
He said: “In the low-end part of Ikoyi, it is difficult to find any flat that is empty and these are Parkview flats that are in the range of N4.5-6 million. These are in high demand because someone who lives in Ikate where he pays N4 million can add N1-2 million to his rent and find his way to Parkview.
“What he is paying for now is not the house alone, but also the location which puts him in a better position. We are finding a lot of people living in good 3-bedroom apartment in Ikate or Osapa moving to Ikoyi for basic apartments by just adding a little sum to their former rent.”
MKO Balogun, CEO of Global PFI, attributed the challenges of unoccupied buildings, especially commercial office buildings to the Covid-19 pandemic, “The challenge of unoccupied offices is largely due to changes in the office space market, which is an aftermath of covid and post-covid economic realities.”
“Before Covid, the problem of that market was over-supply which has not changed. Covid came and added to the misery. Now, post-covid economic realities has come with companies finding ways to manage their cost by directing some of their staff to work from home” he added.
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Olaniyan agrees, noting that the commercial segment is struggling, pointing out however that the B and C grade offices are not suffering as much as A grade which is because a lot of the multinational companies taking up A-grade properties who would typically take 250 square metres space now have half of their staff working from home.
“Some have introduced hot-desking such that no staff has a physical desk. Any day you come you just plug your laptop and work. So, we are seeing a large number of A-grade properties experiencing vacancies while B and C grade are doing better because the indigenous companies still believe in people being physically present in in offices,” he said.
In the midst of all these, Okonjo disclosed that Fine and Country remained optimistic about the real estate market. “We firmly believe that even in challenging times, there are always pockets of opportunities for discerning clients. Our long-term view enables us to identify these pockets and tailor solutions that align with evolving client needs,” she said.
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