By Dotun Akintomide
Eggheads who gathered at the real estate outlook conference for 2017 have proffered a mixed economic outlook for the sector seen to be reflecting the current state of business activities in Nigeria, as the economy plummeted to its all-time lows in the preceding year, Nigerian NewsDirect brings experts’ opinions.
According to the Managing Director/CEO, Alphacrux Limited, Tobi Adama, organizer of the event, the sector in 2017 is still reeling from the effects of the economic downturn and the implications have continued to play out in the current year. Hence, the need to bring together experts to discuss issues bordering on strategic planning and what investors and developers can do differently in strange time like this.
“We have decided to bring stakeholders together because the focus has shifted and the value composition has since changed. We must understand where we are going and embrace the right business approach, because despite recession a few number of real estate companies are still making gains.” Adama said
In early January, Nigerian NewsDirect in its sectoral review of activities in the built environment, had reported that the real estate and construction sector in 2016 recorded respectively, a decline of 7.37% and 6.13% in business activities. This corroborates the figures released by the National Bureau of Statistics (NBS) for the third quarter of 2016 where the sector showed an even poorer performance than the entire GDP.
In his narrative, the Managing Director, Northcourt, a leading real estate consultancy and research firm, Tayo Odunsi who gave a background of activities in 2016, observed it was a year of correction in the country’s real estate. He noted rising inflation (18.3%); successive declines in GDP growth rate in three quarters; insurgency in the North-East-cum-militants’ unrest in the Niger-Delta; weakening currency and reduced public revenue occasioned by the global oil glut were all indicators which ensured a dip in fortune at the property market, compelling an official declaration of recession on the entire economy.
“Even as the economy went down, the development pipeline shrunk drastically forcing quality and price to become the major factor for market’s competitiveness and survival. This left market operators struggling to match quality with price making vacancy rate rise unabatedly in the country,” says Odunsi.
NewsDirect further gathered from Northcourt’s statistical data collected from a survey for the year that residential vacancy rate rose to 33% in Lagos and 26% in Abuja, while Port Harcourt recorded the lowest put at 13%.
Commenting on the high vacancy rate in Lagos, Odunsi opined: “this may be partly due to Lagos having the highest built up area, development stock and investment focus in the country.”
He also said, while 233,735 sqm office spaces remain underdeveloped in the country, the average co-working space has 46% more members than it did two years ago with Nigeria having the 4th highest number of co-working locations in Africa.
Whereas, in hospitality business, Nigeria tops the list of hotel underdevelopment in Africa, however, Lagos and Abuja continue to draw the attention of hoteliers, having respectively, a shared figure of 45% and 43% of the total number of hotel developments in the country, Odunsi disclosed at the event.
The CEO Landmark group, Paul Onwuanibe, while challenging operators not to be deterred with the prevalent downturns, sees avalanche of opportunities in the market in 2017, saying investors must recognise the importance of the nation’s demographic potential and fashion out the proper market segmentation strategy to adequately capture all market segments.
“Considering our demographic dividends, there are still opportunities everywhere you turn in real estate, but the pursuit of excellence and value is key to success. As investors and business owners, our job is to pursue our long dreams by predicting the future and not to dwell on the current undoings in the economy.”
In the same vein, the Development Manager, Landmark group, Joe Orji said irrespective of the current market realities, developers need to wear a thick skin to weather the storm unruffled, noting that innovation and dynamism will continue to drive and actualize pipelines of development in 2017 and in years to come.
On his own part, the Principal partner, Ibukun Efuntayo & Company, Emmanuel Efuntayo cautioned that much growth should not be expected in the GDP due to the delay in the passage of 2017 appropriation bill, which he said, the effect will definitely spill over to the property and construction sector.
“With the non-passage of the budget till now, I don’t see much growth in the GDP at the beginning of the year. Perhaps, in March we could begin to see traction in the sector.”
Nonetheless, Efuntayo said 2017 could witness an unprecedented emergence of more community malls having locals retailers and brands in rent spaces across the country.
Speaking on macroeconomic fluctuations, Founder, Pison Housing Company and MD/CEO, Federal Housing Authority Mortgage Bank, Roland Igbinoba pointed out that, such vagaries have always existed and 2017 will not be spared, but there must be a plan for upland sales by making available, mortgage services amid a reduced purchasing power of would-be buyers.
“Lagos will remain at the forefront of housing solutions with the recently launched ‘Rent-To-Own’ scheme and it’s important for developers to start considering medium housing developments with flexible payment plan to address the challenges of housing affordability.” Igbinoba stressed.
Expressing his views on the global digitalization of operations in the built environment, Architect/Co-founder, Chronos Studeos, Hassan Anifowoshe suggested adequate use of automation systems by stakeholders to provide the growing IT solutions that the sector requires for fast-tracked productivity, as well as improved operational efficiencies. “It’s unthinkable that some people are still standing aloof, failing to tap into the tremendous potentials of the internet era.” He lamented.
Similarly, Co-founder/CEO, Fibre, Obinna Okwodu, while canvassing for an improved usage of digital platforms, called on sector operators to stop underestimating how much they achieve with a robust online presence.
“When we first started, it was difficult to convince people to subscribe to our idea, but with an active online presence, Fibre has been able to revolutionise the housing/rent market in Nigeria, making it a win-win situation for both landlords and prospective tenants with monthly rent payment, which was a clear departure from the yearly payment plan that has become a traditional practice in the country.” Obinna said.
Troubled by the increasing rate of unoccupied buildings majorly at the high-end market, developers, who had hitherto ignored the concept of low and medium housing schemes, experts at the event agreed are now having a shift in focus as more entrants of innovative and affordable housing products are expected to shape the property market outlook in 2017, already seen by many as a buyer’s market.
Meanwhile, contrary to the continuous depreciation on many property developments, land value in the country continues to appreciate modestly, especially along areas with massive developmental prospects.
“On the long run, the general performance of the economy will continue to dictate market differentials, as well as control all the underpinning fundamentals in the sector as the year progresses.” Odunsi said while closing on his thoughts.