The disruptive role of technology and population movements, especially among millennials, are among the four major factors that will drive demand for real estate assets in 2022, experts have said.
The other two factors that will also drive real estate demand in the new year, according to the experts, are deficit in quality real estate and demand for yield by investors in this largely preferred asset class.
Quality real estate assets, they explained, are still in deficit while investors and home buyers, especially foreign and institutional ones, will always look out for them whether commercial, residential or retail.
With the hindsight of positive movements in the sector in 2021, the experts who spoke at ‘2022 Real Estate Market Outlook’ hosted by Northcourt Real Estate in Lagos on Thursday, agreed that the sector has a bright outlook that would translate into growth and opportunities in the new year.
“These four D’s represent the opportunities we see in real estate business going into the new year,” explained Funke Okubadejo, Director Real Estate, at Actis—an institutional investor with interests in diverse sectors of the economy.
After 12 straight quarters of recession, real estate services recovered in the first quarter of 2021 and progressively recorded 3.85 percent GDP growth in the second quarter of the year. This growth, which was the sector’s highest in six years, was higher than Q2 of 2020 by 25.84 percent and 2.08 percent higher than Q1 2021 growth.
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According to Yomi Olugbenro, Tax Leader at Deloitte, though this growth slowed in Q2 2021 to 2.23 percent in Q3 2021, it was still higher than the growth recorded in the third quarter of 2020 by 15.72 percent points.
It is against this background that the experts predicted that the sector would do well in 2022. Okubadejo noted that, at the moment, investors were looking for where to invest productively in order to get good yield, adding, “ yield-hungry investors no longer worry about risks as much as they do with yield.”
Explaining how digital disruption would impact real estate business in the new year, Laide Agboola, CEO, Purple, noted that increasingly, Proptech and blockchain were helping real estate business and making transactions a win-win situation for both developers and their product buyers.
He pointed out that more of these technology disruptions would be deployed in real estate business and that would drive demand significantly in the new year.
Blockchain’s inherent system of trust makes it the ideal technology for real estate and, in recent time, real estate companies all over the globe are using its smart contracts and ledger abilities to transparently and efficiently facilitate renting, buying, investing and even lending.
Similarly, Proptech is helping to keep a tight lead on costs more effectively now. It is helping product suppliers to transfer the benefits of cost optimization to their customers who get properties at lower rates. The use of technology is helping the real estate sector a great deal and also ushering in new professionalism into the business.
Going into the new year, Ayo Ibaru, COO, Northcourt, pointed out that land remains an investment asset to beat, explaining that it remains resilient as its price keeps appreciating. “Demand is still on the increase and this will continue into the new year,” he said.
Though the office market is still challenged and will continue to be so into the new year, Ibaru projected marginal growth in the co-working space despite issues arising from the Covid-19 pandemic. But operators are factoring in Covid precautions and also banking on foreign investors for whom they find office space.
Ibaru noted that 2022 is an election year and that would impact positively on the real estate sector. He explained that a lot of money is expected to be spent this year and the next and much of such money would find its way into real estate, being the only viable investment asset class in the market.
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