Nigerian real estate sector is expected to grow at 2.65 percent in 2020, Northcourt, a real estate investment solutions company, has said in a report released Wednesday.
Economic factors such as the low, but improving purchasing power, demand for indirect commercial real estate, improved construction activities, adoption of technology in construction, and real estate management, are some of the factors highlighted by the real estate firm to shape the industry growth.
“The Nigerian real estate industry as a whole is stabilising and it has the potential to fully stabilise and report growth in 2020, and this is because it is recovering from the effect of the recession,” Ayo Ibaru, COO /Director of Northcourt, said.
Despite exiting 12 consecutive quarters of recession in the first quarter of 2019, Nigerian real estate was hit by slow economic growth, lack of liquidity and dampened purchasing power and thus ended the year on a negative but stabilising mode.
Nigeria’s economic growth of 2.28 percent eluded the real estate sector which contracted by 2.31 percent in the third quarter of 2019. Although lower than the growth reported in the first quarter of 2019, the third-quarter performance was the highest in six months.
Speaking about the subsectors in Nigeria’s property market where opportunities lie for industry players in 2020, Tayo Odunsi, the CEO of Northcourt cited smaller housing units under residential, focus on family entertainment features for hospitality while for office, improved occupancy rates coupled with increased migration of tenants to new Grade A office buildings would be an area to focus for good returns.
According to the forecast by Northcourt, cost of construction is likely to hit the roof due to the expected increase in development activities.
Construction costs to rise by mid-year as development activities rise,” Odunsi said. The real estate company is also optimistic that more international entrants in retail, hospitality and proptech will be witnessed as the year unfolds.
Titled “Nigeria Real Estate Market Outlook”, the 2020 industry report by Northcourt also highlighted some of the challenges that industry players in Nigeria’s property market may face.
Reduced political spending, regulation of the residential real estate sector, susceptible nature of the hospitality industry and self-building of international entrants in the industrial arm of the sector are some of the key issues that will impact performance, as compiled from Northcourt’s report.
However, the Lagos-based real estate firm believes that yields will favour operational real estate in development and business income. Examples of such players that are likely to tap form the projection include those that offer student accommodation, entertainment centres (Family Entertainment Centres, Lounges, Co-working).
“The Finance Bill, once operational, will favour indirect real estate investment including REITs amongst other factors pushing for REITs. Also, recapitalisation of mortgage banks and insurance companies will create traction in those sectors and will be positives for real estate,” Northcourt projected in the 2020 outlook report.
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