A new report by Northcourt predicts that 2016 will be a year of uncertainty for Nigeria’s real estate market, except some fundamentals are revisited by the federal authorities for a truly positive change in sentiments.
According to the Nigerian Real Estate Market Outlook Report 2016, the real estate market will be responsive/ reactive to positive or negative economic sentiments respectively, will be largely dependent on the overall performance of the economy as the demand, supply and price of space is contingent to the well-being of occupiers, developers and investors.
The report predicts that a vibrant market for the sector will be expected if there are; ONE: A revision of the CBN’s exchange rate demand- restrictive policy to reduce uncertainty and investment risk of the Nigerian market while also potentially improving investor sentiment (domestic and foreign) and also stimulating growth in the economy.
TWO: A well-articulated and communicated fiscal plan aimed at reflecting the economy; demonstrating preference for infrastructural improvements and growth of the real sector.
THREE: Financing of the budget by fiscal prudence, effectively increasing the tax base, and removal of petroleum subsidy, which will reduce governments’ recurrent expenditure and free up revenue to be stirred towards far-reaching capital expenditure.
“Where these expectations are implemented in the new year, the residential market will be quick to rebound. Rekindled demand will boost completion of abandoned projects and commencement of portfolio developments. Rents will once again be competitive and investors will once again enjoy upfront annual returns.
“Activities of NMRC are expected to increase and begin to have desire impact – creating liquidity for lenders and assisting homebuyers access debt to buy homes. However should the macro economy maintain status quo, residential markets will grow increasingly bearish to unseen levels in more than a decade,” says Tayo Odunsi Director, Real Estate Advisory, Northcourt Real Estate.
“The office development pipeline is very rich. Never has the nation enjoyed such influx of investment office space available for take-up by third parties as against owner-occupation, which was the norm in the past. The invasion may drive prices down moderately, we also postulate that occupiers may surrender leases in older buildings in preference for new builds, which may be willing to offer competitive rents to vie against current rates in older buildings. 2016 will see numerous completions and as such will be characterised by leasing transactions rather than construction ground breakings.
“Current pipeline of third-party space (about 150,000sqm) needs to be cleared out before most executives will sign off on new originations. Lagos will continue to take the lead, Abuja and second tier cities to follow. With over 25,000sqm to be delivered, Ikoyi in particular, may officially become the prime office destination while Eko Atlantic gradually moves beyond infancy.
“As liquidity increases to compliment the high consumer spending culture of Nigerians, retail business will soar and demand retail space will follow. This will also be premised on the removal of bottlenecks currently felt by all in the retail value- chain; it is expected that reasonable appeals for change will not fall on deaf ears for too long.”