Despite plummeting oil prices which have left the Nigerian economy and its managers on edge, investment interest in commercial real estate remains strong with activities quite upbeat in locations outside the mature up-market areas like Wuse in Abuja, Victoria Island and Ikoyi in Lagos.
This interest coming from both local and international investors is driven by the confidence in the nation’s GDP growth which remains unadjusted at 6.7 percent and also seen to resilient against oil price shocks.
READ ALSO: Seplat Petroleum cuts debt leverage by $100m as low oil prices hit profit
A report by Broll Property Services on the performance of the Nigerian real estate market in the third quarter of 2014 quotes the Director of the IMF African Department as downplaying fears and assuring investors/stakeholders that the real estate market outlook still appeared “robust” especially because some 50 percent of GDP was now generated from the services sector.
The report adds that IMF remains confident that a more diversified economy would be more resilient to shocks from oil shortfalls.
The report which focuses on the development of office properties in outlying areas outside mature up-market locations notes however, that the traditional core office markets continue to experience a flurry of activity with various prime developments in Victoria Island nearing completion and entering the market imminently, a development, it expects, will alleviate the current lack of quality office properties in the region.
Increased investment has led to corresponding increase in demand for office space and, according to Bolaji Edun, Broll Nigeria’s CEO, about 6,720 square metres of office space was transacted on in the last quarter, pointing out that 60 percent of this space was located in Ikeja at the new Landmark House.
Edun added that P&G unveiled this location as its new administrative headquarters along with AC Nielsen, Robert Bosch and Spur which also took up residence at the Landmark House, giving a boost to the Ikeja office market.
“Another significant transaction which accounted for the remaining 40 percent of transactions in the quarter was the unveiling of the Architects Place in Victoria Island which already boasts a 50 percent occupancy rate with one of its twin wings fully occupied”, he said in the report released recently.
The office space market presents an interesting outlook in Q4 which anticipates that, with the completion of properties including Rose of Sharon Tower, NIPOST Towers, Kanti Tower, quality office space will certainly not be in short supply.
READ ALSO: In conversation with foremost Real Estate Developer, Oke Onyehara of Bloc Haus
The report expects about 56,000 square metres of prime space to be delivered by end of 2014 in which case companies will be spoilt for choice when it comes to quality office properties. This however has its flipside and in Edu’s opinion, “the rise in development completions in the next 12 months should lead to increased competition for tenants. We believe this will lead to a slight downward adjustment in rentals within the 12 to 18 months of their completion”.
BusinessDay had earlier reported Munachi Okoye, the CEO of MCO Real Estate Limited, as saying that “the re-basing of Nigeria’s GDP leading to its identification as the largest economy in Africa has put the country on the map as the foremost investment destination for international capital seeking exposure to the African markets which has led to increased interest from international real estate developers seeking to gain an entry to the market”.
Okoye who spoke in a Q3 Report on real estate market, noted that in the commercial segment of the market, institutional investors’ interest have remained very strong in the office space, retail and the hospitality sectors, adding that prime rents in these sectors were as high as US$1,000 per square metre for commercial office, about US$900 per square metre for retail space while room rates for prime hotels ranged from $300 to $500 per night.
CHUKA UROKO
