Despite a rebound in some sectors of the economy, the property market has remained slow in the past two to three years, industry analysts have said.
Investors have not been showing much interest in the market, according to stakeholders, leading to property glut and increasing default on construction loans.
Various reports on the property market in the country show that from residential to commercial and industrial, there has been investor apathy as people grapple with other economic realities rather than invest in real estate.
Real estate expert and fellow of the Nigerian Institution for Estate Surveyors and Valuers, Mr Kola Akomolede, said the real estate market had been saturated with unsold properties, some of which had been there for as long as one year.
He said, “A few years back, the economy went into recession, luckily we came out of it but the recovery has not been as rapid as people would have expected. We are still experiencing some low-down in the economy especially in the property market.
“Most property and developments that were abandoned because of lack of funds have not resumed fully because of scarcity of funds. This is mainly because foreign investments are not coming in; even those who have the money to invest are not bringing it in.”
He stated that the economic situation of the country had been affecting real estate development and the demand, especially the luxury and very expensive properties.
“It has also been difficult to get money from the banks. The sector and the economy generally have been very slowly,” he said.
A former Chairman, Nigerian Institute of Estate Surveyors and Valuers, Lagos Branch, Mr Rogba Orimalade, also posited that the property market had been very slow.
According to him, those that are renting either for commercial, residential or industrial are managing their present location while companies that planned to expand, where they are or relocate to other places, are trying to look inward based on economic realities.
He stated that due to the number of vacant properties, many renters were renegotiating the places where they currently use, knowing that landlords would have no choice but to be flexible.
Stakeholders said every segment of the property market had been affected.
A 2019 half year report by real estate investment firm, Broll Nigeria, said Landlords in the formal retail market had been largely pessimistic about the prospects of the economy.
The report found that some existing tenants who had struggled to meet their financial obligations in the past had been exiting malls as their lease tenures expired, despite financial concessions and payment plans offered by some landlords.
It also stated that international brand interest in the Nigerian retail space has slowed down to a certain degree as strong enquiries in the formal retail market had not translated into actual transactions.
In the office market, another report also by Broll said asking rents had remained fairly unchanged, adding that A-grade properties in Victoria Island and Ikoyi had recorded marginal declines.
“In Ikoyi, average asking rents for A-grade properties have declined by seven per cent while average asking rentals for B-grade stock have remained unchanged. In Victorian Island, average asking rents for A-grade space have declined by 1.5 per cent and remained unchanged in the B-grade segment,” it added.
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According to the report, in the first half of 2019, demand activity in the A-grade market slowed relative to that of half year of 2018, where a number of large transactions were concluded, especially towards the end of the year.
It explained that enquiries had also been noted to have slowed in the half year of 2019.
The report stated that most landlords still perceived the market to be a tenant’s market and continued to offer competitive leasing terms to prospective tenants on a case-by-case basis, especially with the anticipated increased market supply.
“This is more so the case with developers with debt servicing obligations associated with their properties,” it added.
Despite the slow demand, about 27,000 square metres of leasable office space would be delivered in the A-grade market by December 2019, putting further pressure on the current vacancy levels, the report said.
Orimalade stated that some planned economic policies might further compound the industry’s woes.
He said, “It doesn’t help matters when you hear that one or two extra taxes are going to be introduced. This will trickle down to customers, meaning that people’s bills will be higher. These things are making the average investor or the populace in general to be cautious of their spending coupled with the fact that the economy is not growing as expected.
“There is a bit of apathy from even people who want to invest in real estate or in new project. It has become a wait-and-see thing; those who are doing well are those able to come up with packages that are very favourable in terms of accommodating and reasonable terms of payment but beyond that every other person is being cautious.”
He said default on rent was currently huge as the economy seemed not to be growing the way it should.
According to him, some landlords are taking back their properties from those who manage them due to a situation where more than half of the properties have been sold or rented.
“A lot of them believe that it is better they have their property than having someone manage it and no one is interested in letting it. Even those that are renting, we are very flexible with them; if they move out we are not sure of who is coming in and if they can pay their rent. It is a very sluggish economy we have now,” he added.
Orimalada, however, stated that stakeholders believed that the new economic advisory team put together by the Presidency would help to improve the situation.
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