Arguably,
2013 could be regarded as a good year for Nigeria’s Real Estate Industry. The
successes were not those worth a tea party, but the stories definitely are
worth telling. While some analysts observed that the industry nose-dived to
some extent in 2013, none disagreed that the market remains one of the safest
havens for investments in 2014.
One
of the most gratifying developments especially for operators in the advisory
and advocacy spaces is that the discourse of Real Estate, as one of Nigeria’s
economic power-houses keeps souring out of year-long oblivion. This has placed
the sector at the centre of economic debates in recent times, and resultantly
increased business interests for service companies. The development has further
attracted international interests, giving government and global financial
institutions reasons to energize the sector in the twilight of dwindling oil
revenue.
For
example, between 2012 and 2013, infrastructure and housing remain constant on
Nigeria’s annual budget and keep attracting significant government and private
sector interests; with the Minister of Finance, Dr. Ngozi Okonjo-Iweala,
religiously making case for the Mortgage Refinance Corporation, MRC, as one of
the windows of creating more jobs and encourage investments in the housing
sector. This sector, the Minister opined is to argument the nation’s economy as
more African countries are discovering crude oil.
However,
in the face of market indifference and growing commercial Real Estate Market,
2013 was not a roller-coaster year for luxury apartments and hospitality.
Speaking on CNBC Africa, Mr. Olu-Abayomi Sanya, Managing Director of GoldBanc
Management Associates, argued that the major issue with the fall in prices of
luxury apartments is partly over-price and partly liquidity. “Most of the
takers (of luxury apartments) are moving away to where it is cheaper… again,
there is no liquidity in the market for these transactions, therefore there are
lots of flats in the market to take”, he said.
What
Operators Should Brace up for and Why
1.
The Residential Real Estate Myth: Any
Tom will agree that a sector that wields N160tr in investment potential should
be taken seriously. Besides, housing remains one of the basic needs of man and
Nigeria’s population is estimated to have increased from 10% in 1960 to 50%
2012. By the foregoing, this sector is on economic watch-list for 2014.
The
Myth: In a market where the minimum wage
is N18, 000 and a significant percentage of its population lives on less than
N154 per day, it is only a myth that the market predicted by analysts will be
met by demand. Also, the high-end market is received a serious hit in 2013 with
four bedroom apartment cascading from an all-time $100,000 to $75,000.
2014
in View: If the MRC and the Federal Mortgage
Bank roll out differently this year, the construction sector will take a leap
with development and marketing companies bracing up to meet a middle,
middle-low housing market. Other things being equal, our best guess is that
developers, architects, manufacturers and service companies will get busy this
year.
2.
The Commercial/Retail Space: With
the meteoric growth of Nigerian middle class, urban regeneration moves and the
shopping culture that comes with it – showing an estimated $115 billion annual
consumption spend; it is almost automatic to predict that this sector is a
space to watch this year.
The
Myth: It is instructive to note that
locations investible for commercial Real Estate are selected and few. While
locations such as Lagos, Abuja, Port Harcourt, Enugu, and Ibadan remain on the
investment map, investors will still develop cold-feet in putting money in
northern cities such as Kano and Zaria due to insurgent challenges.
2014
in View: Due to the calibre of tenants and
investors in this space, our prediction is that the Facility Management sector
will reap greatly. Also, marketing and media services will see a boast with
global brands contesting not just for the best space, but the highest number of
customers.
3.
Construction: One needs no analysts to know that
Nigeria suffers from a huge infrastructure deficit. From roads to rails, power
to aviation sector, water and energy. In 2013 alone, this sector gulped a
whopping N497 billion of the nation’s annual budget, plus significant
investments from the private sector. If these figures are anything to go by,
construction and manufacturing should start blinking in the green, creating
more jobs and encouraging more investments in other sectors.
The
Myth: Most of the visible achievements on
infrastructure are still on paper. The figures are mouth-watering, while the
roads remain unmotorable and the only news about rail available in
public space is the Abuja-Kano route. Power remains epileptic and the citizens
still remain the provider of drinkable water for themselves.
2014
in View: However, with most of the major
roads in Nigeria requesting attention, the aviation industry reform, and the
privatization efforts in the power sector; we advise Facility Managers to begin
to brace for asset management strategies that can sustain the life span of
these projects. Also, the manufacturing sector will have a filled year with
these projects demanding huge material investments.
4.
Industrial Real Estate: Analysts
have suggested that this sector will be at its lowest ebb this year, especially
has the production sector remains unchanging because of unstable power supply.
In view of this, Real Estate assets in industrial areas such as Atan and Agbara
have taken a leap for life in residential. The proposed 10-lane Badagry
expressway and the Lagos Light rail project are two USPs Real Estate developers
spin to their customers.
The
Myth: That electricity, which is the
fulcrum of industry, remains a mirage thereby discouraging production companies
from coming into the country; and the few ones available are finding their way
to neighbouring countries.
2014
In View: President Jonathan recently
announced that power will be stable in the country mid-2014. The privatization
of PHCN is also a testimony to this. From the foregoing, we see a development
in property titles where some areas are marked as industrial. Realtors, legal
practioners, and government agencies will as a result, be busy this year should
production industry find its way back to the centre stage.
On
the whole, if all things work according to projections and analyses, Nigeria’
Real Estate will interestingly operate as a system in 2014. This will become
imperative as the entire spectrum of the industry will require interaction to
sustain it. Also, the financial sector at both primary and secondary markets
will receive a boost. And finally, the nation’s Gross Domestic Product, GDP
will have a huge feel.
Written
by Olusesan Ogunnyoye: olusesanogunyooye@3investmedia.com
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