Rising demand in eastern commercial real estate signals opportunity
Over the years, investment interest in the real estate market in the eastern part of Nigeria has remained low despite existing opportunities buoyed by growing population and rising urbanisation in the region.
The major cities of this region are urbanising rapidly on account of commerce and education. These have created demand for real estate assets which, in turn, has created investment opportunities.
Though the market has grown over the past few years, it has done so at different rates. This explains why the market in Port Harcourt commands greater prices when compared to those of Aba, Enugu and Onitsha.
The reason also is that Port Harcourt has a larger size, higher prices, and superior infrastructure, which is especially important for commercial properties, particularly industrial and retail business.
A recent report by Northcourt Real Estate, which studied the Eastern Nigeria real estate market, says that, even though the distance between Aba and PH is just about 54km, the Aba property market is generally less efficient than that of Port Harcourt, with lower property prices and consequently, returns, attributing this to inadequate roads which extend 1-hour commute to over two hours.
According to the report, Aba’s proximity to the expressway leading to Port Harcourt provides little benefit, and despite the attraction represented by Aba’s productivity, its environment discourages property investment from investors based in Port Harcourt.
“Many argue that Aba’s property market scarcely reflects the city’s economic productivity. Low rental and capital value expectations tend to slow down the development of new buildings. The consequent decrease in supply should ordinarily raise rents, but the accessibility issues remain a barrier to growth,” Tayo Odunsi, CEO of Northcourt, told BusinessDay.
Continuing, he said, “This infrastructure handicap prevents investors from gaining access to producers. It also prevents producers from exporting goods conveniently and effectively. As a result, Aba’s property market fails to attract consistent revenues from Aba’s trade economy. The inadequacy of rental growth and property values to match economic productivity indicates a lack of connection between the Port Harcourt property market and the economy.”
Many argue that Aba’s property market scarcely reflects the city’s economic productivity. Harmony Estate, which was intended to support low, middle, and high-income residents, appears to have been largely occupied by high-income residents.
Though Enugu has seen expansion and distribution of higher learning institutions as well as the creation of manufacturing hubs and related commercial entities, which have enhanced rural-urban migration in Enugu, it has not seen a corresponding investment and development in its real estate market.
This has put a strain on urban housing supply, evidenced by housing shortages, increased rents and high land values within cities. “This has predictably resulted in the rise of squatter communities on the outskirts of the city, illegal changes in land use, planning breaches, substandard amenities, and inadequate infrastructure,” Odunsi said.
He added: “A review of Enugu’s public housing framework from 1999 to 2020 shows a decided bent towards low-income earners, who make up a significant proportion of the city’s population.
“The implementation has not been efficient with examples such as Ebeano and Golf Course Housing Estates being developed with high-income residents in mind.”
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This is also the case in Coal City View Estate, initially planned for more high-density developments than exist today. Enugu property prices have also been influenced by the high cost of building and construction materials.
The result of this, according to him, is overcrowding of the low to mid-income nodes in the city. “As things stand, the rate and extent of rural-urban migration in Enugu has exceeded the government’s ability to manage the demands for providing suitable housing,” he said.
Arguably, Akwa Ibom in the South-South region of the country presents a slightly different scenario. A multi-year study of the state’s residential market shows a year-on-year increase in both capital and rental values, except in 2015 (Uyo), 2016 (Eket and Uyo) and 2019 (Ikot Ekpene).
This may be related to the global economic performance inconsistencies as two-bedroom apartments generated the largest returns in 2022 with 9.72 percent, 7.84 percent and 7.66 percent for Ikot Ekpene, Eket and Uyo respectively.
Odunsi said an assessment of Eket, Uyo and Ikot Ekpene senatorial districts suggested that the highest average rental and capital values were in Uyo senatorial district. “But the district provides limited hedging against inflation, suggesting that the Ikot Ekpene senatorial district might provide more protection in this regard,” he said.