A new report on Nigerian real estate market has projected that, with relative political stability in the country, warehousing and logistics will be contributing the most to the economy from the real estate sector.
The report, released recently by Ubosi Eleh + Co, a firm of estate surveyors and valuers based in Lagos, is largely a review of real estate market activities in Nigeria in 2023 and projections into 2024.
The report, which describes 2023 as a year of uncertainties that required conservative approach to investment, notes that although the hospitality sector in the northern region of the country was undermined by security challenges, there will be a better performance in 2024.
This will be a lot better in the southern part of the country, particularly in Lagos where hospitality real estate experienced investment surge in the previous year with the entry of new players into the market.
On the retail sector, the report is optimistic that, despite the myriad of challenges, notably unreliable electricity supply, the devaluation of the Naira and insecurity, the sector would prosper in 2024 because as retail outlets align with Nigerian consumers’ preferences, there would be increased transactions as economic prosperity surges.
The report notes, however, that while retail outlets would maintain patronage, the diminished purchasing power of the consumers will result in decrease in the average basket size of shoppers.
Similarly, it projects that, due to the economic downturn, tenants hunt for vacant spaces in big malls would be challenging. Conversely, investors in modest shopping plazas and supermarkets sitting on less than 100 square metres should anticipate substantial rewards.
“Notwithstanding the down turn in the economy, population growth and the desire to own property would spur growth in the residential market, particularly in the major cities in the country, namely Lagos, Abuja, and Port Harcourt,” Chudi Ubosi, Principal Partner at Ubosi Eleh, said.
Ubosi anticipates property prices to experience significant increase arising from inflation and construction cost hikes.
The office space market, according to the report, will see increased vacancy rates following the adoption of remote working models and downsizing of space needs by occupiers, pointing that the decline in tenant demand resulted in little rental growth or slight decline in certain sectors.
The report explained that the uncertainties that defined the market in the year under review came largely from the general elections of that year. “In an election year, people are skeptical. The investment environment is uncertain and many would rather hold on to their money. Real estate responds to the environment as well,” Ubosi noted.
He added that, besides the election, two other factors also defined economic activities during the year and they were the withdrawal of petrol subsidy by the Bola Tinubu government on May 29,2023, and the devaluation of the Naira against other currencies.
The report says that the withdrawal of petrol subsidy triggered energy cost induced inflation as transport cost increased by 30-50 percent. Similarly, the official exchange rate of the Naira increased from N457.314 in January of that year to over N794.53 per dollar.
On the whole, the report posits that Nigeria’s economy experienced mixed performance in 2023, characterized by a subdued growth and persistent inflationary pressures.
In its analysis of the 2024 budget of N28.7 trillion, the report shows that infrastructure and housing got N1.32 trillion for projects across the country, representing 5 percent of the entire budget. It considered this allocation grossly inadequate, moreso in the light of the depreciated value of the Naira.
