Due largely to growing confidence in the Nigerian economy, the past six to 12 months have seen a considerable rise in demand for commercial real estate by both local and foreign investors who are out to buy or lease spaces for offices or business.
Before now, the high vacancy rate which hit the residential market as a direct consequence of the 2008-2009 downturn was already visible in the commercial market, rising 10-15 percent in otherwise business hubs like Lagos Island.
The investor confidence driving the rising demand is premised on Nigeria’s strong economic fundamentals as the second-largest economy in sub-Saharan Africa, with an annual GDP growth of between 6-7 percent.
In his monthly economic review presented at a breakfast meeting in Lagos recently, Bismarck Rewane, CEO, Financial Derivatives Company, hinted that the investor confidence in the economy was also based on the expectation that inflation would flat out to 7-8 percent in the coming four years, adding that exchange rate of the naira to the USD had been relatively stable.
Rewane also emphasised the place of Nigeria as the most populous country in Africa with 165 million people – a population that has been projected to remain young with 76 percent under the age of 35 in 2030.
Confirming the rise in demand in an interview with BusinessDay, Omorinsola Ipaye, CEO, K.Parkwood Property Services, noted that the office space segment of commercial real estate had seen more demand, followed by the hospitality sector, where occupancy rate had also gone up significantly.
“We see demand for conventional office spaces very encouraging. If you look at Victoria Island, for instance, out of every 10 buildings, one is being developed into 10-15 floors; there are some local and international interests who want to work in visible and standard office environment,” she observed.
Ipaye said Nigeria was an emerging market that would be an economic powerhouse in the next few years, adding that the country was the new frontier market and new economy based on its population and demographics.
An investor who pleaded anonymity pointed out that in spite of the emptiness in some office space developments, there was high demand for Grade A office space. He added that developments like The Mansard Place, Victoria Mall Plaza, Eko Towers and others, which came into the market not-too-long ago, had recorded almost 100 percent occupancy.
Similarly, The Heritage Place and The Wings, which are still under construction in Lagos, have recorded over 50 percent expression of interest because both are Grade A office complexes that promise quality finishing.
Ipaye, whose company is also developing an office complex called The Pimlico in Yaba area of Lagos, said that outside the highbrow neighbourhoods of Ikoyi and Victoria Island, demand was also very strong for mid-end office space.
The rising demand has also led to a corresponding rise in supply, which explains the growing number of start-ups that include Eko Hotel’s 27-floor office space; RMB Properties 15-floor The Wings, the 16-floor Civic Centre Tower, 24-floor Eko Pearl at Eko Atlantic City, and the multi-floor Waves, among others.
A recent market survey conducted by Financial Derivatives shows that in Victoria Island, as against 23 percent average vacancy rate in residential properties, the commercial properties have only 7 percent in that same location.
By: Chuka Uroko