By Kingsley Adegboye
EXPERTS in the real estate sub-sector of the nation’s economy have reiterated that the sub-sector remains one of the potential revenue drivers for the Nigerian economy in 2018. This is based on the sector’s performance so far in the year as well as outlook for the rest of the year. Although the economy was in recession at the beginning of the previous year, the exit from recession in the second quarter of 2017, has created an opportunity for rekindled activity and subsequent recovery for real estate, according to the experts.
Speaking at the third edition of the West Africa Property Investment, WAPI, summit which held recently, Broll CEO, Bolaji Edu reiterated the huge investment potential that exists in the Nigerian real estate sector. He noted that Nigeria as a power house in West Africa, has the capability to attract investors, stressing that the diversification of the economy should be extended to the sector.
He noted that “the fund managers and asset managers with the property skills are able to drive excess returns. The market is creating good quality grade A stock developed by local investors and international private equity firms, as well as completed assets generating stabilised returns, which investors in West Africa are targeting.” According to him, the capital base of real estate will keep growing due to investments in Grade A commercial office and retail segments of the sector, pointing out, however, that to cater for the needs of the domestic occupier market, there has to be development of good quality Grade B or Grade B+ investment. “There has also been a rise in demand for space from sectors such as finance, oil and gas, professional services and technology, propelling a larger market for real estate investment in the country.
Unlike in the past when most of the available rental spaces were taken up by businesses predominantly in oil and gas, demand enquiries are now more diversified. “The market, however, remains a tenants’ market as demand and supply remain in disequilibrium due to the existing and anticipated supply in the market. This stalls the scope of rental growth in the market,” the Broll boss said. In its Occupier Service Snapshot Report for 2017, Broll Nigeria’s Head of Corporate Real Estate Services and Research, Nnenna Alintah, noted that the rental trend “endured a consistent decline in the past three years due to the simultaneous increase in building stock and contraction in economic activities.” With bullish expectations for the Nigerian economy in 2018, it is expected that Nigerian commercial real estate will mirror this development although not immediately. In the short term, as the economy improves towards 2019, ‘greenshoots’ of rental growth should return. The sector is expected to also attract more investors during the year due to its long-term investment benefits.
Meanwhile, Stanbic IBTC has thrown its weight behind REIT Investors in Real Estate Investment Trust. REIT has received a boost as Stanbic IBTC Holdings Plc has indicated its preparedness to support individuals and businesses interested in long-term investment in the real estate sector.