The Nigerian Real Estate Market half-year report, released by Northcourt, a real estate advisory, has projected a rise in the number of excess office space occupied by tenants towards the end of the year.
The projection is predicated on the decline in grade A and B office utilization rates as more businesses reassess their space requirements. However, on the supply side, construction slowed on pipeline projects. The exception to this, the report said, is owner-occupier developments.
The report reviews the performance of Nigeria’s real estate market in the first six months of 2020, taking into consideration key economic indicators, regional influences, and the COVID-19 pandemic.
It also indicated that few grade A office space leases were signed and analysts report that most have been less than N100,000 per square metres(psm).
It is unlikely that the demand for office space will increase. A few head office spaces were converted to residential use following large corporates who booked out nearby hotels and guesthouses for key staff. The report also indicated that the nation’s capital is taking a more capitalist approach to property use.
According to the report, Coworking, one of the high growth areas in Nigeria’s real estate was crippled by lockdown restrictions, social distancing rules adopted to curtail the spread of COVID-19.
For, instance, Lagos, with the largest concentration of coworking spaces in Nigeria (over 60per cent) and a leading part of Nigeria’s coworking sector, is estimated to have lost N300million in revenue as of March 2020.
It also indicated that on March 20, one of the country’s pioneer coworking spaces, CCHub, suspended activities until further notice. Lead Space also announced that its hubs would be closed due to social distancing restrictions.
The pandemic was also a nightmare of sorts – especially for Grade A malls were significantly reduced footfall, closed stores, and limited opening hours have become the norm.
Spending is now focused on essentials purchased from the erstwhile unsung hero, community shopping centres.
Consequently, a few line stores closed due to the reduced demand that made it difficult to balance operational costs with revenues, thereby offering local retailers the opportunity to introduce retail/mixed-use projects.
For example, Purple capital and Blenco are expected to debut mixed-use and retail projects in the Lekki and Ajah areas of Lagos state.
In all, pent up demand is expected to find expression once the movement restrictions ease. Analysts suggest that the fall in household consumption will persist as long as movement restriction
Reduced reliance on brick and mortar retail and slow economic recovery also led to higher vacancy rates even as Shoprite announced 8.1per cent loss in sales FY 2019. Jumia recorded a seven per cent decline in revenue in Q1 2020.
Chief Operation Officer and Director – Real Estate Research in Northcourt, Ayo Ibaru, said COVID-19 has stressed the adoption of technology, specialisation and open partnerships between local and international stakeholders.