For the various real estate market segments – residential, student housing, commercial, industrial, retail, among others, the stories are mixed about trends that defined them in 2021.
While some saw positive trends, others had theirs in the negative, while others had a mix of the two. The residential segment of the market, for instance, had more positive trends. Within the year, this sub-market witnessed rising demand.
But this demand was for budget family housing units, according to Yomi Olugbenro, West Africa tax leader at Deloitte, who noted, however, that vacancy rates hovered between 5 percent and 8percent across major cities of Nigeria.
Olugbenro, who spoke in Lagos at the 2021 edition of the West Africa Property Investment (WAPI) summit, noted further that returns on investment (RoI) was higher for smaller sized apartments, particularly 2-bedroom apartments.
Though the Federal Government’s 300,000 housing-unit project has completed 5,000 units already with several state governments making interventions with affordable housing projects, Olugbenro pointed out that homeownership level in Nigeria was still less than 25 percent.
In the commercial segment of the market, especially in commercial office space, the story is not encouraging as the future of work and the evolving role of the office is impacting the patronage for office accommodation.
“There was 40 percent vacancy rates for office accommodation. Grade A & B office accommodation are probably the worst hit. Retail outlets experienced about 30 percent vacancy rates. There are about 600 co-working office spaces in Nigeria and 72 percent of these spaces reported a decline in the number of users,” the tax leader said.
Of the different commercial office market nodes in Nigeria, Victoria Island, arguably, has the highest number of Grade A & B office buildings. These include The Wings, Civic Tower, Nestoil Tower, Churchgate Tower I, Churchgate Tower II, Standard Chartered Bank HQ Building, etc.
The region, according to Estate Intel, an online real estate research platform, benefits from the decay in the Lagos Island Business District, leading to a gradual but mass migration of businesses to that area.
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“Currently, there are 371,762.47 square metres of completed stock, with 97,603 square metres of office space in the pipeline in Victoria Island. Based on the data that we have gathered, the average rent for grade A+ office in Victoria Island is $500/sqm/annum (N182,500/sqm/annum),” Dolapo Omidire, founder/CEO, Estate Intel, explained to BusinessDay.
He added that this number constitutes 4.2 percent of the total stock compared to Ikoyi where the grade A+ rents is about $690 per square metre per annum (N252,137/sqm/annum), and constitutes over 35.7 percent of the stock.
Student housing was another segment of the market that made a significant impact in the outgoing year. It is estimated that more than 70 percent of higher education students seek alternative accommodation due to poor campus hostels while there are more than 15 million higher education students in Nigeria.
This means that there is a significant opportunity for investment in this submarket. Olugbenro noted that RoI here is about 22 percent compared to 4-5 percent on residential real estate.
According to him, “onerous agreements with universities, price sensitivity and access to land have been constraining factors, but the sector is expected to mature into a dedicated asset class in the next 10-15 years.”
Growth in the e-commerce segment, which is a fallout of COVID-19 lockdown and social distancing rule, has increased the requirement for storage and fulfillment centres. This has had the positive effect of boosting the demand for warehousing and logistics.
Olugbenro noted that key drivers for growth in the data centre segment include population growth, increasing digitalization and growing internet access.
