Rents are rising faster in short-let residential property markets in major cities, following a massive hike in the cost of diesel and the rising inflation in the country.
The situation is compounding the woes of operators, who are forced to increase charges and grapple with low patronage as major customers desert such outlets.
Short-let apartments are properties considered as an alternative to hotels, which can be let out from weeks to a few months and even a year. Such offerings range from studio apartments to bedrooms, duplexes and bungalows.
The sub-segment of real estate, estimated at nearly a billion naira worth in operational value, has enjoyed a slice of the hospitality business over time due to its cost-effectiveness for investors to recoup invested funds timely and flexibility in payment.
Essentially, the attraction to short-let apartments hinges on comfort and offering of facilities with privacy like home.
In meeting guests’ needs, apartments tend to be larger than standard hotel rooms and include a full kitchen as well as facilities like Wi-Fi, 24-hours light and water, security, fully furnished, DSTV/Closed Circuit Television, parking on premises, washer and dryer.
But the attraction is being crippled by the severe energy crisis, which may have to endure its excruciating effect of higher and arbitrary tariffs, including a prolonged period of power outages.
The power sector witnessed the two-electricity system collapse last week, forcing households, businesses, manufacturers and others into total darkness. Besides, Nigeria’s headline inflation increased by 15.70 per cent year-on-year in February as food inflation rose by 17.11 per cent.
With the power challenge, most of the operators of short-let apartments are forced to rely on generators, which run on diesel 24 hours amid its rising cost. As of last week, diesel prices hit about N730 per litre in major city centres.
The Guardian’s survey of Lagos and Abuja environs last week revealed that prices have risen by over 20 per cent for short-let apartments between last December and now.
For instance, a short-let apartment that was rented out for N50, 000 last December now ranges around N80, 000 per day; apartments, which were previously N450, 000 per week now goes for N500, 000, while the one which was previously N1, 700,000 per monthly now go for N1, 850,000. Prices for longer stays have also gone, but slightly negotiable.
The General Manager, Olympus Apartments, Lagos, Mr. OIympus Oluwafemi, who confirmed the development, said it has been a difficult time for the business, which is negatively impacted by rising inflation and the ongoing increase in the cost of energy (diesel).
Oluwafemi said: “A single room apartment as of last year, which goes for N12, 000 per day has risen to N17, 000 due to the cost of diesel. If you have a client that now wants to stay for a longer time, we can give a discount and ask the person to pay N15, 000.
Similarly, a big room that was given out at the rate of N20, 000 before now goes for 27,000. Two-bedroom that went for N35, 000 per day, depending on the setting and area before now goes for N45, 000.
He said: “In apartments where we charged N45, 000 before, now we charge N55, 000 per day. Otherwise, we wouldn’t be able to remain in business and grow the business too.”
“Before the energy crisis, a three-bedroom apartment went for between N50, 000 and N55, 000 but now go for N65, 000 per night. The only way out for us operators is just to increase our prices so that we can meet other commitments or we go out of business.
“As things are going now, we cannot be operating at a loss. We can have two guests pairing in a two-bedroom or one guest in a one-bedroom paying N30, 000 or N35, 000, we cannot be burning diesel at cost of N38, 000.
“This is really having a bad effect on the development of the business. When you tell a customer that the cost of diesel is high and because of that you have to ration the electricity supply, they would not want to hear that. All they want is absolute comfort.”
He also revealed that patronage has nosedived as sales dropped abysmally due to an increase in the price of apartment rooms. According to him, as of last year, patronage was about 80 to 90 per cent but has fallen to between 50 to 60 per cent.
“Our findings show that the energy problem is the same thing all over the world in the United Kingdom, United States of America and Canada but it is felt more in Nigeria. Everyone is complaining. Regrettably in Nigeria, once prices of items go up, it is always difficult for it to come down. People just have to adjust,” he said.
An official with Maryland Short-let Apartments, Gudu, Abuja, Jane Ifinanchi, said since the issue of diesel increment came up, it has affected their business, with many clients having to stay away.
She said the hike in the cost of diesel has made them also increase their apartments rate to cover the cost of running the generator.
“Basically, there is no power and diesel is high. It looks like a collaborative decision by the power company and the diesel sellers. By the time clients come and there is no electricity or generator, they go to other places. If the situation persists, we may continue to review our prices,” she said.
A realtor/short-let apartment operator in Lagos, Shophie Bob, expressed concerns that operators are helpless with the situation and the only option left to stay afloat was to increase prices.
“ Apartments that you used to get for N45, 000 before, are now given out at the rate of N55, 000. Some operations have increased their rates by N10, 000, N5, 000 others by N20, 000 for one, two and three bedrooms respectively because they just have to run the generator throughout the day.
“For now, there is no other way out except the government bringing down the cost of diesel and providing cheaper and constant power supply. The Federal Government must intervene and tackle the challenges facing entrepreneurs and other private businesses. It was not us that forced it upon ourselves.”