Like other real estate industries globally, Nigeria’s property market is not immune to the heat from the coronavirus outbreak as industry investors are already adopting a wait-and-see attitude amid uncertainty in the sector.
The unknown outcome of the pandemic which has put Nigeria’s property market in limbo is making industry players pause on their decision to make any real estate investments, as compiled from an industry survey.
“We had a client who wanted to buy a property, and we had already finalised everything but due to the virus outbreak and currency uncertainty, he said he would want to wait for the next 90 days to watch the market,” Chidi Etoniru, managing partner at Joe Etoniru and Associates, a real estate development company, said.
In order to curtail the spread of the deadly coronavirus, President Muhammadu Buhari on Sunday announced “the cessation of all movements in Lagos and the FCT for an initial period of 14 days with effect from 11pm on Monday, 30th March 2020”, with Ogun State due to join Friday.
The president directed residents of Lagos, Ogun and FCT to “stay in their homes”, while all businesses and offices within these locations were ordered to fully close during the lockdown, with the inclusion of financial institutions.
Nigeria, Africa’s largest producer of crude oil, has seen its revenue projection come under threat after oil prices slumped below $30 a barrel, lower than the government’s $57 target.
The global fight against the spread of coronavirus and a price war between Saudi Arabia and Russia are the catalysts of the lower oil price.
Meanwhile, history has shown that prolonged periods of depressed oil prices do not only push the Nigerian economy south but also affect the country’s real estate market.
Nigeria’s real estate sector was largely affected by the commodity price crisis of 2015/2016 which sent oil prices below $30 in early 2016. The sector is yet to recover from the 12-quarter recession it entered due to the meltdown.
“Nigeria’s real estate trajectory has risen and fallen with international oil markets,” Oxford Business Group said.
While the coronavirus outbreak may be bringing back the trend of 2016, industry analysts expect the hospitality, retail and commercial real estate segments that are highly exposed to international tourism to be most affected.
Hospitality
Nigeria’s hospitality industry which was expected to leverage its hotel room capacity of 7,940, the second-largest in Africa after Egypt, and the growing Airbnb sub-sector to post an estimated annual growth above 4 percent in 2020 is largely at risk of the coronavirus outbreak.
“Real estate businesses that are largely dependent on international tourism are most at risk of the virus outbreak,” Ayo Ibaru, COO and director, real estate, at Northcourt, said.
While consumer spending on tourism, hospitality, and recreation in Nigeria was projected to measure up to figures reported by more developed economies in 2020, the outbreak of the virus may, however, cut short the expectations.

Nigeria recently closed the Lagos and Abuja international airports to prevent further entry of the virus. In the absence of business tourists, industry analysts expect hotel vacancy to jump.

Retail

While the malls in Nigeria have modified their structures to meet the needs of the country’s population whose interest to shop at a convenient market was increasing, the stay-at-home and social distancing campaign has put their businesses in a standstill position.

Business activities in malls in Lagos and Abuja, the Nigerian cities with the most modernised malls, will be on hold during the two-week lockdown unless for stores that sell food and medical products.

Industry analysts are optimistic that the retail market will most likely repeat its 2016 performance due to the ‘corona-economy’.

Nigeria’s retail industry was largely affected in 2016 when Africa’s largest economy slipped into recession. Vacancy rates in malls jumped during the period as consumer spending was eroded due to the slow economic growth from the lower crude oil price.

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According to industry data, retail space in Nigeria has grown from 30,000sqm some two years ago to over 500,000sqm as of 2019.

Commercial real estate

The global oil market saw an unexpected plunge in crude price since 1991 in March 2020 resulting from what is an all-out price war between the world’s largest oil producers.

According to industry players, a lower crude price means Nigeria’s office market is at higher risk of low performance.

Prior to the commodity price crisis of 2015/2016 that saw oil prices go below $30 in early 2016, the largest corporate occupier and demand driver for the luxury residential property came from the oil industry. This changed significantly and led to an even greater amount of vacancies in an already saturated market.

Data by Broll Nigeria showed that oil and gas and tech industries championed the bulk of the grade-A office transaction that led to the record of largest take-up in five years at 20,100 square metres in 2019.
For the first time since 2014, Nigeria’s grade-A office reported the largest take-up on the back of increased demand from tech and oil and gas industries, data from Nigeria’s Office Market Viewpoint H2:2019 by Broll Nigeria show.

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