The Covid-19 pandemic, which started as a health challenge in 2019 ballooned from the first quarter of 2020 to become an economic issue, bringing domestic and global economies on their knees. CHUKA UROKO, Property Editor, writes that the restriction in movement, social and physical distancing rule, repeated lockdowns and the resultant economic downturn has turned out a steep learning curve for businesses, including real estate.
When COVID-19 disease became a pandemic, from a mere virus that was considered a health issue, it devastatingly disrupted economic activities across communities, countries, continents and the entire world. Most of the challenges faced in 2020 arose from the pandemic. With several lockdowns and unrest in Nigeria specifically, businesses were left gasping for survival.
In Nigeria where housing situation is dire, it was a big issue. From just 7million units in 1991, housing deficit in the country has risen to 12 million in 2007; 14 million in 2010 and currently 20 million units as estimated.
Again, here is a country where only 10 percent of those who desire to own homes, either by purchasing or building, can afford to do so. This is against 72 percent home ownership level in USA; 78 percent in UK; 60 percent in China; 54 percent in Korea, and 92 percent in Singapore.
The pandemic was a huge challenge, not only for the government, but also for those in the real estate business to supply products to the market. But, on the flip side, there is good news.
The limiting impact of the deadly virus, reflected in movement restrictions, social and physical distancing rules and repeated lockdowns in both social and economic activities, turned out, inexorably, to be instant learning curve for businesses, including real estate.
It became a case of swim or sink for real estate developers whose survival instincts pushed them to think outside the box and to become creative and innovative in their product and service offering.
The challenges of the time led many to continuously reconfigure, rethink, refocus and re-imagine their capital structure, and give quick response to market changes and customer/partner expectations.
One of the major players in the country’s real estate space for whom the pandemic and its impact were a huge learning curve is Purple Group—developers and owners of Purplemaryland (formerly Maryland Mall) and Purplelekki.
As it was for other players in their class, it was a tough order for Purple managers, considering the need to continue to work towards maintaining confidence amongst their domestic and international alliances. They also had the task of assuring their investors that their returns were achievable and that delivering on proposed assets amidst lockdowns and a contracting economy was possible.
The group remained focused and undaunted, recalling that they had been able to test their products in the worst of market conditions, especially during the economic recession of 2016.
“Fortunately, our mixed use developments have been designed, specifically, for this market. Based on deep research analysis and as a response to the market in 2016, they have been validated as the appropriate product for Nigerian market even in 2020,” Laide Agboola, the Group Co-founder and Chief Executive Officer, told BusinessDay.
Purple’s relationship with its tenants/partners and the growth of their businesses remain paramount to the operators which is why, according to the chief executive, those partners remain with them despite the many economic issues.
On a continuous basis, the group prioritises brand awareness. Their product/partner products awareness and marketing with an unusually lower priced rental regime derives from their lower priced building strategy supported by smaller fit-for-purpose spatial planning.
This has been the group’s strategy in maintaining their 97 percent occupancy level. Agboola noted that 2020 has been an unusual year and has required them to deliver unusual responses tailor-made across their partners to arrive at sustainable businesses.
“This also speaks to the resilience of the businesses within our centre. This year has also reinforced our belief in our mixed use retail strategy, making us focus on essential services and domestic retailers who are flexible and have shown adaptability to the peculiarities of the Nigerian Market,” he said.
Over the years Purple has seen numerous shifts. Moving from shared spaces and services to co-working and co-living has shown the group the value of mixed use assets, but also the need for privacy and self-sustainability.
They recognize that there is gradual shift towards smaller, mixed use facilities that give customers some sort of balanced, but affordable and flexible lifestyle. “This is the immediate future of real estate and it is what our Purplenano product line brings to complement our Purplelekki and eventually our Purplemaryland product offerings,” the chief executive assured.
The drive, ultimately, is to be able to deliver on work, shop, eat, play, drink and live concept across their product offerings and back it up with a strong online marketplace—purple.shop.
In doing all these and future projects, Purple like other players in the market, is limited by some inadequacies in the operating environment, hence the call for supportive policies and economic laws to ensure that all players are driving towards resolving shelter deficit in the country.
“We are not a portfolio international company or investor. We are Nigerians and we are on ground. Our focus is to develop Nigeria, but Nigeria must provide an investment climate that is evidently supportive of growth so that the domestic players and institutions do not shy away from investing locally, especially at a time like this,” Agboola counseled.
Obviously, there is an infrastructural gap which is even more apparent now with the collapse of the oil price coupled with the pandemic. This highlights the need for domestic players and institutions to back leading domestic players that have boots on the ground and neck deep in the development cycle.
The infrastructure gap, arguably, is a threat to local players’ margins created from lower interest rate regimes and, according to Agboola, it is not in their plan to continuously pass on the exchange rate changes in their lifestyle developments to their consumers.
Besides development challenges, developers also have operational bottlenecks such as cost of power, good access roads and other infrastructural deficits, meaning that they have to bear these costs.
But, as a matter of conscience, the developers are very mindful about pricing and continuous increase in prices in a down market. They believe that their ability to sell or lease products at attractive prices can only be sustained where they do not have variables moving constantly.
“With the current economic recession as well as reduced spending power, real estate tends to be seen as luxury rather than an investment. We bank on the fact that the pandemic has shown the real importance of work, shop, eat play, drink, live in a singular location. However, this must be at the right price point,” the Purple CEO noted.
In recent time, especially with galloping inflation, material sourcing and a weak domestic manufacturing industry have become a stretch on right product pricing for the domestic market, as appropriate items continually have to be sourced offshore.
This, coupled with the downward direction of the Naira, continues to increase the cost of developments, limiting developers in terms of finishing and finance to innovate further.
But Agboola assures that, notwithstanding these obvious limitations, they would continue to innovate and form alliances with their network of contractors, and building partnerships that align their interest of delivering value to that of their consumers based on attractive pricing.
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