Uneasy calm pervades build-to-let, buy-to-let and house-for- rent market in Nigeria as bad economy has pushed tenants to request for rent relief and, in some cases, extension, meaning that this segment of the property market faces an uncertain future, estate managers have said.
This trend, according to the managers, has created a delicate balance in the market, adding that it cuts across residential, commercial office space and retail facilities and has raised concerns among landlords and investors whose investments are at risk of zero returns.
They note that it is not yet clear whether new investments will be willing and ready to go into that market in spite of its large size. It is estimated that 80 percent of Nigeria’s 200 million population lives in rented accommodation, spending sizeable portion of their income on rents.
Nigerians generally are in dire situation, contending with high energy costs, transport fares for short commutes to offices and business premises, rising school fees and escalating rents, especially in the cities where some landlords have become Shylocks with rent hike.
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“These are unprecedented times and, in the industry, we need to put aside personal conveniences and come together for the greater good. We are already engaging with all our tenants with some relief options, ranging from rent-free months, flexible payment plans, lease extensions,” a property owner, who did not want to be named, confirmed to BusinessDay at the weekend.
The property owner expressed worry that “in the days and months to come, apart from the frosty relationship the trend may arise between landlords and their tenants, rental properties will suffer from lack of maintenance and sustainability. Again, new investments will drop significantly.”
Ayo Ibaru, CEO, Northcourt Real Estate, also confirmed to BusinessDay that, based on request, a few property owners were beginning to work out softer payment methods for their tenants.
“These landlords are agreeing to collect same in the not-too-distant future. They are also willing to discuss extended payment terms,” he said, adding that some property owners were accepting smaller part-payments than usual.
It is, however, not all gloom in the rental market as some tenants are still able to pay their rents. Gbenga Olaniyan, CEO, Estate Links, noted in a telephone interview that the market was still strong even in some highbrow areas like the low end of Ikoyi in Lagos.
“The impact of the bad economy is being felt, but not as severe as people think,” he said, explaining that some tenants were still able to pay their rent at the moment while, for some others, their rents are not yet due until, perhaps, end of the year.
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However, the fear, according to a BusinessDay survey, is that if there is no relief and business activities are halted, the ability of tenants to pay rents for commercial and residential properties may become a challenge in the next few months.
The survey shows further that while a lot of tenants are still able to pay their rents despite the hash economy, landlords may run dry of revenue from rent.
“It’s going to take a few rounds of renewals and new leases before the new trends fully emerge. An office lease can take up to 6 months to get executed and you’d need a few of those before you can begin to see trends,” Dolapo Omidire, Founder/CEO, Estate Intel, said.
He added that the overarching themes, however, were flexible rental payment, rental incentives such as rent-free period, tenant allowance, shorter leases and options to contract or expand their space requirements as the need arises.
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MKO Balogun, CEO, Global PFI, agreed with this view, adding that landlords’ considerations for tenants at the moment centred on flexible payment – quarterly instead of annual; the usual fit out period moratorium and reduction in space requirements.
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