Activity seen returning to construction sites in Q1 on budget approval

After a very challenging 2015 when most construction and building sites went on holiday, activity will be returning to the sector within the first quarter (Q1) of 2016 when it is likely that the national budget will be passed by the National Assembly, analysts have said.

The analysts explain that after the budget is passed, the Federal Government will release funds into the economy, adding that following the government‘s commitment to improving infrastructure, the real estate sector is expected to become more active and attractive.

Bismarck Rewane, CEO, Financial Derivatives Company, Lagos, quotes the latest report from the National Bureau of Statistics (NBS) as saying that the real estate sector grew by 2.06 percent in Q3‘15, which was 0.92 percent and 3.85 percent lower than figures recorded in Q2‘15 and Q3‘14 respectively.

Rewane, whose spoke during his bi-monthly economic review, added that the sector’s contribution to GDP accounted for 7.57 percent of the total GDP, down from 8.69 percent recorded in Q2‘15.

“Similarly, the construction sector contracted marginally by 0.11 percent in Q3‘15, which represents a decline of 6.52 percent and 11.42 percent, compared to figures recorded in Q2‘15 and Q3‘14 respectively; the sector‘s contribution to GDP also fell to 3.22 percent, compared with 4.5 percent recorded in Q2‘15 and 3.32 percent in Q3‘14”, he disclosed.

Rewane noted that when activity returns to construction sites as predicted, Lagos and Abuja would likely benefit the most from new developments, given their pride of place in the country, as well as their current alignment in terms of governance. He explained that having the same political party at the center and state means there will be better coordination in achieving common goals.

“Considering that the government‘s intention for the real estate sector is now clearer, we think this will boost confidence levels of private investors in the sector. The government‘s anti-corruption stance is also likely to reduce the amount of money going out of the country and increase inflows into sectors in the economy such as real estate”, he said.

Femi Akintunde, MD/CEO, Alpha Mead Facilities Management Company Limited, agrees, adding however, that opportunities that will be found in real estate in the new year will be mostly in corporate and that these would not be available to everybody.

He further observed that in commercial real estate or offices space, there was a glut at the moment because demand was weak, adding that there would be less development activity in this space in 2016 except those that have already been started.

“Projects are being suspended because the budgets that they started on that made them viable are no longer sustainable. Promoters of those projects have slowed down. So, many new developments may not be seen this year and that means reduced opportunities for FM services”, he posited.

CHUKA UROKO