Whole blocks of apartments vacant, for sale signs littering quiet streets and unsightly weeds taking over empty compounds. This is the story of real estate in Ikoyi, Lekki and Oniru today. Upon closer inspection I have found that there are developers who are still able to move a significant amount of inventory in this seemingly crowded market. What are they doing right? How are they doing it? This leads me to define success as for a developer, and that is simply being able to sell enough of inventory to offset the cost of development before the property is completed. After pondering these questions I decided to take a scientific approach to this problem, I would observe these successful developers and come up with a hypothesis as to why they are so successful.
The first thing I observed was that these successful developers had a very good track record for developing durable and functional projects, but most importantly they delivered their projects on time. Due to the experience factor they have mastered how long it would take them to conclude a project. So when an investor is coming in on the ground level, or even before ground is broken, he or she has a good idea when the project would be completed. This is very interesting because it gives a potential homebuyer or investor a timeline in which they can spread out their payment and make arrangements to come up with the money. With property prices on the island well in the 100 million naira range this makes excellent economic sense. Let’s take an example here, Mr. Thomas wants to buy a 4 bedroom serviced flat in Ikoyi, at today’s prices, a lot of what is on offer is about one hundred and sixty million naira ($1 Million) and these flats are already completed, Mr. Thomas cannot opt for any extra amenities that the developer has not made available without breaking walls and spending extra money.
Mr. Thomas runs into a developer about to break ground on a block of 10 units of 4 bed flats and offers him the option of putting down 25% now and securing a flat which will be ready in 24 months. After Mr. Thomas does his research and sees other such project that have been done by the developer he is convinced. He gets to break down his payments and has the potential of his property having a higher value at the time of delivery. In addition the sales agreement gives Mr. Thomas the opportunity to pay for this property over an extended period of time, the ability to have a say in the materials used to finish his unit and also an exit clause in the event that he cannot finish making all the payments as agreed.
The second thing I observed about these successful developers is that they are excellent at profiling their customers. It is not enough to just develop a block of flats in Ikoyi and believe that an Oil company will take it because of the location and a swimming pool, or that some successful executive will buy it as a status symbol. I find that a lot of developers under estimate the sophistication of the typical buyer of a 160million naira property. Case in point, I have two clients currently looking for much the same thing, but for different reasons. The first clients are a young married couple, they are both very well educated, well-traveled and need a serviced apartment with 3 bedrooms and a BQ for their growing family. They are young professionals and spend a great deal of time at work, so when they come home they want to relax. They already own an amazing 4 bedroom house in Houston, TX on an acre of Land (property is valued at $250,000 or 40million naira) so they have an idea of what a world class property should be like, in addition they want security and services. They don’t want to deal with paying a security guard, water treatment issues and handling diesel procurement and storage. So for them any random flat wouldn’t do, it has to be well finished, with amenities and a space they can relax and entertain in.
The second client is quite the opposite, they can be termed ‘empty nesters’, they are a couple in their late 50’s, they have been married for 30 years have built and stayed all over Lagos, now they live in a sprawling 6 bedroom house in Lekki 1. The husband is a Chairman of a medium sized company and the wife is a successful business woman. They have 5 adult children; all but one of them lives at home. When they started making plans for their current home they envisioned that their kids would be around or their grandkids would come over to play in the garden, but as it stands now, they find themselves alone in this big house most nights.
Interestingly enough both clients have taken interest in a new development that is about to start in Ikoyi, 4 Bed terrace house that will be delivered in 24 months. The older couple wants to merge 2 rooms into one to form a bigger master suite, use another room as a home office and a guest room for the grandkids. The younger couple wants to keep all 4 bedrooms, want a dedicated play room for the children with cctv so they can keep an eye on them. The developers of this project are okay with incorporating different features to meet the needs of their clients, and at the ground level these additions or subtractions can be made easily.
Following the last observation, leads us to the next, which is that successful developers who sell off plan do a very good job of anticipating the needs of their customers. These developers make standard amenities to help their customers live and enjoy the spaces they create; they are mindful to not over develop and leave space for ample parking and recreational activities. They anticipate the needs of their customers by providing pre-wired cable outlets for their units or providing an intercom service so the occupants can reach the gate house and servants quarters conveniently from their units. I cannot tell you how many supposed “high end” properties that I have been into with prices worth of one hundred and sixty million naira, but no provisions were made for DSTV! Basically the buyer would have to start trunking cables all over the house. Or a property that has an asking price of two hundred and fifty million naira that doesn’t come with cctv so the inhabitants of the house can see their surroundings, after all home invasions and armed robberies do happen. Or multi-room audio systems which are standard in $250,000 (forty million naira) home in the southern states of the US.
My conclusion is that success in property development and sales is not random, there are deliberate actions taken to reach these expected ends. These developers protect their brands and always deliver on time thereby creating an environment where people can trust their word, a premium in this part of the world. They target their customers very carefully and provide world class amenities in anticipation of their needs. This is why on the same street one development is sold out and another hasn’t even sold a single unit.