• Friday, March 29, 2024
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BusinessDay

Politics, technology to shape real estate investment in 2019, experts say

High vacancy rate in VI, Ikoyi drives down rent by 8% in H1

Besides urbanisation, demographic shifts, sustainability and competition from emerging markets which will play disruptive role, politics and technology are two major factors that will shape real estate investment and development in 2019, experts have said.

It follows that these are the two main issues that investors would watch as they make their investment decisions and projections into the New Year. To ignore them may turn out a wrong step forward. 

Politics is a dominant activity in Nigeria today ahead of the February 2019 general elections. The implication of this to the various sectors of the economy including real estate is that investments will have to be put on hold till after the contest, the result and the emergence of a new government.

It is expected that business activities will slow down, demand for new space, especially for offices or business premises, will drop significantly while investors will adopt ‘sit-don-look’ attitude, waiting to see policy direction of the new government.

“If Buhari the sitting president wins, that means the president economic condition slowdown will persist, but if Atiku or any of the presidential candidate emerges as president, there will be a change of perception, leading to new investment in the economy”, argues Johnson Chukwuma, a structural engineer, insisting that whichever way the result of the election turns, no meaningful activity will take place in the real estate space before  June next year.

Technology has been described as the new face and future of real estate. Already, as seen in the financial sector where Fintect (financial technology) is dictating and pointing the way, proptech (property technology) is, increasingly) assuming the new backbone of real estate transactions.

The forecast by PwC for 2019 in Europe also presents an interesting perspective. According to research carried out, there needs to be a widening of traditional meanings of real estate to accommodate real asset related services businesses going into the future.

For this reason, experts advise that investing in infrastructure should go beyond traditional assets such as railways or utilities to include a whole new investable asset classes to service the digital economy, including 5G infrastructure, data centres and charging points for electric and, increasingly, autonomous vehicles, all of which provide a social return to consumers through better connectivity or the environment in terms of lowering carbon emissions.

“In Africa, for instance, the private sector has to start thinking of the big picture, seeing the gaps in government infrastructure, step in and invest not only in traditional real estate but in relevant assets related services such as co-work spaces, studio homes within central business districts to reduce the home-to-work commute and child care facilities within work metropolis; whether individually or through collaborative efforts”, Udo Okonjo, CEO, Fine and Country West Africa, told BusinessDay.

Udo’s submission responds to the changing real estate landscape and  PwC’s forecast on the immediate future for Africa which shows that by 2020, investable real estate will have grown by more than 55 percent compared to 2012.  By 2025, there will be 37 ‘megacities’, up from 23 today, and 12 of these will be in emerging markets while by 2025, emerging markets will host 60 percent of global construction activity.

The potential for not just profit (for the investors) but the development of the society is immense because, as Okonjo explained, at the end of the day, the efforts are all geared towards developing a more sophisticated and well-rounded society that is at par with the rest of the world.

Globally, the New Year looks another challenging year for landlords whether it is the ones in the commercial and retail segments of the market or those playing in the up-market residential real estate space who are already contending with issues around policies, fees and costs in Europe and economic downturn as in Africa and Nigeria in particular.

“On the face of it, the lettings market in the UK has been flat in 2018 with not much prospect of growth this year with policy changes relating to fees and costs due to kick in”, notes PropertyWire, an online platform which tracks residential housing markets in over 100 countries of the world.

Ray Clancy, the editor of the online platform, believes that is likely to be the case in London with the latest reports suggesting a slow outlook. The November lettings index from Hamptons International shows that rents increased just 0.1 percent year-on-year in Greater London.

Clancy quotes the Association of Residential Letting Agents (ARLA) as saying it is certain that this year will be a challenging one for landlords and lettings agents acknowledge this. Rent costs in the UK’s private rented sector will rise in line with increased demand from prospective tenants and the impacts of the expected tenant fees ban in 2019.

 

CHUKA UROKO