In 2018, the real estate industry witnessed general downturns due to several factors ranging from government macro economic policy to over-supply in commercial, retail as well as inappropriate supply in the residential sector.
The development also impacted negatively on the sector’s contribution to the National Gross Domestic Product (GDP). The latest GDP figure shows a negative growth of -2.68per cent at the end of October 2018, thus, the Q3 contribution to GDP dropped from 7.09 per cent in Q2 to 6.88 per cent in Q3.
In the economic and investment front, the HSBC bank and a Swiss multinational investment bank, UBS’ exited the country; this did not send the right signals to the investors’ community.
A report released by HSBC pointed out that investor spend has been affected by the political uncertainties devolving from the 2019 elections, adding that it was closing down its representative office, not entirely confident of the government’s ability to turn around the economy.
The report also suggested that deficient infrastructure and unemployment contributed to the moderated 2019 forecast growth rate of 2.5per cent.Having accused HSBC of corruption, the Federal government regarded this report as politically and physiologically skewed.
In all this, JP Morgan recorded a turnover of $45billion in the Importers &Exporters window in Q2 2018 and plans to expand its African operations.Players in the Nigerian Stock Market who haven’t liquidate their investments woke up in October to a rise in inflation figures, mindful that it could further complicate investing in Q1 of 2019.
The influence of politics, governance and markets’ performance continues to hold as portfolio investors looked to cut their losses, opting for investment opportunities in Eastern Europe. Estimated losses in the equities market were in excess of N1 trillion for 2018.
Experts however, said the downturn in the real estate industry was more of mis-judgment on the part of operators than government policies and lack of infrastructure.
According to them, addressing the mismatch of current supply versus actual local demand and uptake in the housing, retail, office and hospitality sectors will herald a new vista for the sector.
They also pointed out the need for the deployment of technology to make Nigeria’s real estate industry more investable, increase liquidity to drive greater home ownership, as major talking point for 2019.
For instance, the Managing Director and Chief Executive Officer, Global Property & Facilities International Ltd Nigeria (PFI), Dr. Mohammed Balogun, said for the sector to grow and contribute more to national development, there is an urgent need for restructuring, not by the government but by practitioners themselves.
He added that the industry was plagued with a structural problem that stakeholders could deal with, without the government. According to him, the sector witnessed a rising trend for studio apartments as investment property.
He said, “Largely driven by developers’ response to the millennial market’s demands, blue-chip executives and expatriates are also opting for studio apartments, investors who buy bigger houses for investment purposes are now being advised to purchase multiple studio apartments to sustain portfolio cash flow. Factors influencing demand for studio apartments amongst millennials are better space management, functionality and cost of managing residential units”.
Dr. Balogun wants stakeholders in the sector to come up with initiatives, which will help to weather the murky waters.“We need to do some differently to get a better result; the recent procedure will not lead to the expected outcome because trends are changing”, he said.According to him, occupiers of luxury apartments are ready to pay a 15 per cent premium when offered quality facility management.
He also stressed the need for professionals to advise their clients appropriately so that they can make wise investment decision and not to be too profit minded.For 2019, Dr. Balogun said being an election year; the industry will continue to slow down till April when budget is likely to be passed.
“However, there will be the usual lag between economic recovery and market recovery but real estate, which has suffered from a sharp supply- demand imbalance, widening vacancy rates and falling rents, looks close to bottoming out”, he noted.
Also, in a recent KPMG Survey on 130 real estate decision makers from 36 countries, 8 per cent of respondents see digital and technological innovation as an opportunity but only 24 per cent have a clear digital and technology strategy.
For instance, the way properties are conceived and built; the way they are researched, marketed and sold; and, most importantly, what they offer to tenants in the way of energy-efficient, flexible, adaptable smart functionality are all becoming critical factors when assessing the future viability of investment properties and establishing sustainable long-term investment criteria.
Everything in real estate from how retail, industrial and office processes are conducted to the way buildings are designed, built and operated are now transformed in profound ways.
In developed countries, residential real estate is already well along in their digital transformation.
Proptech pioneer and the chief executive officer of new market entrant, ZAMA, Abdulhakeem Sadiq, said the increasing role and use of Proptech is a boon for the regional real estate sector.
Sadiq, who expressed this view during the just concluded West African Property Investment forum in Lagos (WAPI), said: “Proptech is slowly gaining momentum in developed markets, and we feel a developing market like Nigeria can learn and re-calibrate itself for seasoned investors.
“Our market has its peculiar problems and introducing a process driven technology would greatly enhance the validity of property valuation for instance, or even in the process finding a reputable agent to work with to help sell and buy properties”, he noted.
For the Chief Executive Officer/Vice Chairman of Fine and Country West Africa, Udo Maryanne Okonjo, technology is going to help in speedy decisions in the sector as it provides the transparency people need to close up deals faster.
“Technology will play a significant role, because transactions are now more transparent, with technology, you see more competitions, you can compare trends because lack of transparency usually affects decision making. If you are able to access information to make comparism, you will be better informed on what is in the offing because not all clients will be available in the location of the property meant for transaction”, she added.
For 2019, Mrs. Okonjo said though, it is an election year but it presents a good opportunity for investors.
According to her, there are rays of hope for better days ahead because some significant growth was identified in the commercial space last year.
“We saw some rays of hope in the commercial space last year. We did two major transactions, which were massive measuring about 8,000 square metres, which were quite substantial. In addition, we got more enquiries even though, the elections are near and things are hard for people especially those aspiring for residential space. “ We expect to see more activities because in 2018, we started seeing some recovery, it will continue this year and technology will definitely play a vital role”.
“ People are positive because 2019 presents great opportunities for investments in the real estate. It is better to invest when the sector is recovering than when it has fully recovered”, she added.
In its 2019 Nigeria Real Estate Market Outlook report, a real estate investment solutions company, Northcourt noted that residential market would see more partnerships involving Property technology (Protech) firms and the introduction of data-driven products and services.
Property startups, the firm said, are raising funds from local and foreign investors who are not averred to potential risks vis-à-vis the high yields obtainable.
In the report released over the weekend, the firm noted that although, the office market has continued to struggle as high vacancy rates and flexible lease terms remained paramount in many lease negotiations. Still, there were new leases signed and pipeline developments in the sector.
In the retail trends, the report said, the sector continues to support the growth of mid-sized shopping centres even though vacancies in ‘Grade A’ Malls have reduced on average with landlords demonstrating an understanding of the economy in their dealings with tenants.
It also forecast a positive outlook in the office market segment with Nigeria becoming the fastest growing market in Africa for Airbnb, the platform that allows property owners earn income on their residential assets, going by the over 200 per cent growth witnessed in the last five years.