The impact of COVID-19 on individual, household and organisation incomes has left many landlords cash trapped as many tenants have either defaulted or delayed in paying their rents, a survey by BusinessDay shows.
Also affected by the outbreak of the deadly virus, property owners in Nigeria’s residential, commercial office spaces and retail facilities say they are unable to collect rent from many of their tenants, even after granting some rent relief.
“For the past two months, many of my tenants have been telling me stories whenever I ask for my rent and I don’t even know what to do,” a property owner who simply identified himself as Mr Afolabi tells BusinessDay at Yaba, Lagos.
Apart from the frosty relationship that may arise between landlords and their tenants, the impact of COVID-19 on Nigeria’s rental market could mean that going forward, rental properties will suffer from lack of maintenance and sustainability and new investments in build-to-let or buy-to-let properties will see a decline.
Despite the gradual reopening of the Nigerian economy following the five-week lockdown in Lagos, Ogun and Abuja, a lot of Nigerian businesses and individuals who have been affected my COVID-19 are not expected by experts to recover in 2020.
“The economic effects of COVID-19 have been very severe on many households in Nigeria because of the massive strain the prolonged knockdown has added on many businesses,” Freeman Osonuga, expert at Property Broker, says.
According to the managing director, Adloyalty Business Network, with no bailout from the government for businesses to cushion the adverse effects of the pandemic, many businesses are as a result struggling with lots of workers laid off and massive slashes in take-home of those workers who are not sacked.
“The attendant effect of this is that there has been a lot of delays and defaults in rent payments,” Osonuga states, adding that some landlords have been kind enough to give their tenants some months free of their rent while others have resorted to giving the defaulting tenants more time to pay up.
Analysis of data by Muster, a pro-tech company that offers shared housing services, reveals that tenants who are working in hospitality and film production industries (some of the sectors that were hit hard by COVID-19), are the ones who delayed in their rent payment.
“What we saw was that our property subscribers that work in some certain sectors had a significant reaction to the impact of COVID-19,” Ibraheem Babalola, co-founder/CEO of Muster, notes.
According to the three-year-old company, property subscribers who work in the financial services industry did not delay in paying their rent. While the start-up company reported zero percent default rate in 2019, the outbreak of COVID-19 is projected by industry analysts to break the record.
“Landlords still want their money. Our initial agreement with them was that any subscriber that fails to pay their rent would be denied after 30 hours, but as a result of COVID-19 we extended it to 14 days,” Babalola says.
Due to the impact of COVID-19, Muster explains that tenants are now downgrading from a more expensive room to a less expensive room as their income has been affected by the impact of COVID-19.
Meanwhile, an analyst poll by BusinessDay in the first week of June reveals that industry players expect the impact of COVID-19 to affect Nigeria’s rental market by August of 2020.
“The impact of COVID-19 on rent payment will be felt mostly in the next three months as the majority of tenants are still able to pay their rent at the moment,” Modupe Anjous, managing director, Rydal Mews Limited, told BusinessDay two months ago.
According to the survey, the lack of COVID-19 palliative and slowdown in business activities will pose a challenge on the ability of tenants to pay rents across the sub-sector of the industry.
“It is going to take a few rounds of renewals and new leases before the new trends fully emerge. An office lease can take up to six 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 on June 7.
According to Omidire, the overarching themes, however, are flexibility in 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.
