Real Estate: Bright Future
The real estate and construction sector of the economy has all it takes to contribute more to the Gross Domestic Product (GDP) in this fiscal year. But this is only if certain conditions are met. Experts are convinced that with the right indices in place to spur the contributions from the private sector, despite the Federal Government’s paltry N555.88 billion 2018 budget for Power, Works and Housing ministry, good times may be here for the industry, MUYIWA LUCAS reports.
By virtue of her sheer population of 170 million, Nigeria presents very viable market opportunities for goods and services, making it an investor’s haven. Such opportunities also present themselves in the real estate and construction sector of the economy.
The sector, believed to hold huge potential in job creation and contribution to the Gross Domestic Product (GDP), was undermined in the last two fiscal years (2016 and 2017) by some economic factors, such as the uncertainty suffered by the currency; falling production and double digit inflation that saw the country fall into negative growth. These doused heavily investors’confidence in the real estate sector, nay, the economy.
But with the country out of recession, the negative economic indices may be giving way to a brighter prospects. Experts are convinced that as the economy improves in 2018, the picture for real estate, both for occupational and capital markets, will start to improve as well.
One of such experts who holds this opinion is Mr. Thomas Mundy, Head of Advisory for Sub-Saharan Africa, Jones Lang LaSalle Incorporated (JLL), an American professional services and investment management company expert in real estate.
Mundy, at the West Africa Property Investment (WAPI) summit held in Lagos, last November, disclosed that though there would be the usual lag between economic and market recovery, but for real estate, which has suffered from a sharp supply demand imbalance, widening vacancy rates and falling rents, 2018 will be a year of consolidation and recovery for the sector.
His views are underpinned by more quantifiable progress in some areas across the economy. “First, importantly for real estate investors, the market is starting to gain more confidence in the economy backed by an improving external environment.The government policy-making is gaining some credibility through plans to support diversification and fiscal consolidation with the backing of external bodies. Also, we are starting to see evidence that the decline in rental rates in Lagos is reaching the bottom of the cycle,” he explained.
Mundy revealed that these factors have been further complemented by the legislative framework being put in place for real estate pricing to mitigate the impact of a volatile economy, including an improvement in the structural undersupply of investment in real estate stock, which he noted will provide increasing opportunities, for both local and international investors in the economy this year.
Although the Federal Government set up several agencies to tackle the housing needs of Nigerians, especially the Federal Housing Authority (FHA), it is disappointing that over the last two years, the FHA has not added a block to the housing stock. Highlighting the docility of these agencies, Costec Consultants Managing Partner, Mr. John Agele Alufohai, revealed that Nigeria’s mortgage system, cannot support a housing policy that will deliver affordable houses to Nigerians because of high mortgage rates, which are usually given at short tenures; a difficult business environment, high inflation, and unstable policies.
However, the initiatives of the other agencies like the Nigeria Mortgage Refinance Company (NMRC) may pay off this year. The NMRC has entered into several partnerships with housing focused bodies and organisations. For instance, last November, the Company signed a Memorandum of Understanding with the Lagos state government and a consortium of developers to buildand deliver 20,000 housing units in Lagos. The MoU, signed by the parties, is in line with the Lagos Affordable Public Housing (L.A.P.H.) initiative of the Governor Akinwunmi Ambode-led administration, geared towards building 20,000 housing units through a joint venture initiative (JVI). It is hoped that the dividends from this partnership will trigger the real estate market into higher gear this year.
On the part of the Federal Government, its efforts might also begin to have effect in the housing market. Minister of Power, Works and Housing, Mr Babatunde Fashola, last year, disclosed that the government was working on avoiding mistakes of previous housing projects that saw the houses abandoned. He explained that some houses constructed by some past administrations were not occupied because they did not take into cognisance the issues of culture of the people, climate and location of projects.
“At this moment we are constructing houses in 33 states, when we finish then we would subject that design to affordability test. When we find its works then we will subject it to acceptability test,” he said. This, on completion, these stock will also ginger the sector.
According to the Head, Property Management, SFS Capital Limited, Victoria Island, Lagos, Mr. Bolarinwa Odeyingbo, this year would be better for the sector, especially as the recession is easing out gradually. He explained that some properties would set the tone for the market this year. This will be mainly in retail sector that is, malls, including the mass medium income category on the Mainland part of Lagos State, which drove the market. He observed that areas, such as Yaba and its environs, Surulere, Maryland, Magodo Phase 2 (Shangisha/Ketu Ikosi axis), Gbagada, and some other central areas on the Lagos mainland, will experience a boost. In Abuja, Phase 3, comprising Galadimawa, Kabusa, Lokogoma down to Apo resettlement will experienced a boost. For instance, he explained that the success of the $68 million Novare Gateway Mall in Abuja last year presents an indication of what is to expect this year.
Private sector initiatives
Private sector investment will also influence the industry this year. Some of these projects are expected to get to an advanced stage, bringing in more money into the business, and they include:
Imperial International Business City
The Imperial International Business City (IIBC), is a $300 million, 200-hectare housing project, promoted by the Elegushi Royal Family (ERF) of Lagos and ChannelDrill Resources Limited, a real estate development firm. The development, which started last August, will further stimulate the property market this year with its huge investment opportunities. The IIBC, is being built on the Lagos lagoon, and will run from Freedom road to Kunsenla Road, to Oba Saheed Ademola Elegushi Road, through Lekki Phase 1. The IIBC is being designed as a smart business city.
Developed by RMB Westport, The Wings development of close to 27,000m² GLA is situated in one of the most exclusive addresses right in the heart of the CBD on Victoria Island and is anchored by Oando Plc.
The development comprises two towers allowing for about 27,000m² of lettable area. The building is a game changer in the way developers are fusing sophistication, design, and functionality in office development with high quality finishes, 360-degree views and energy efficient features.
Royal Gardens Mall
Developed by RMB Westport, the Royal Gardens Mall will offer just a little below 30,000m² of quality retail space. The mall is strategically located next to the entrance for the Royal Gardens Estate where approximately 126, 000 vehicles ply daily. The mall will also be competing with Novare Lekki Mall owned by Novare Equity Partners.
Eko Atlantic is a brand-new city that is being developed on reclaimed land adjacent to Victoria Island. The city has created 10 million m² of prime real-estate on which office andresidential developments are breaking ground. The Business District alone will have 650,000m² of GLA to offer the market.
On completion, Eko Atlantic will be home to 500,000 residents with an expected commuter volume of 300,000 people. Eko Pearl Towers is the first completed residential building of a five-tower proposed development in the cities Marina district. The development comes in addition to the completion of the major road infrastructure.
Lekki City, Lagos
Rendeavour’s Lekki project development site is located on 1,000 ha within the Lekki Free Trade Zone, the largest free trade zone in West Africa. The site is adjacent to the approved location for the proposed Lekki International Airport and in close proximity to the deep sea port and a number of planned industrial developments. The project is at planning stage, and is a joint venture with the Lagos State Government.
Landmark Village is a mixed-use development by Landmark Africa, a real estate and property development company in Nigeria. The 38,000m² development in Victoria Island will embody the “live, work, play” concept that is central to Landmark Africa’s developments. It is aimed to mirror nodes like Melrose Arch, Rosebank and Illovo in Johannesburg and developments like Canary Wharf in London. The development will have two office towers offering grade A accommodation, residential apartments, retail outlets, a 250 room four star hotel and a convention centre. The development will offer other amenities like leisure and recreational facilities.
By and large, this year looks very promising for the real estate industry.