Economic crisis affecting real estate – Report

The state of the country’s economy has affected the real estate sector adversely in 2024, a report by Ubosi Eleh & Co. has stated.

The report, titled “The Nigeria Real Estate Report 2024”, noted, “Although Lagos is the economic nerve centre of Nigeria, the current state of the nation’s economy has affected office real estate adversely.

“Many businesses and companies have folded up completely, while some others are barely afloat and have reduced staff strength and office space for them to survive. A factual visit to Victoria Island, once the prime commercial district of Lagos gives a clear picture. The take-up rate for commercial office space is slow primarily as a result of the economy.”

According to the report, following the COVID-19 pandemic, many companies adopted the work-from-home model, which proved to be a cost-effective solution.

“Following the Covid-19 pandemic and the introduction of work from home, many firms sustained this practice, having appraised its cost-benefit and used the model to reduce their space needs and, in effect long-term operational costs.

“Commercial real estate in the larger part of Mainland Lagos had a fairly good run in 2023, recording a 25-30 per cent increase over rental values in the previous year 2022. Ikeja GRA recorded an even higher increase of 30-35 per cent increase.

“Commercial space in 2023, let for N60,000 per square metre in Ikeja CBD Alausa, N80,000 per square metre in Ikeja GRA, N40,000 per square metre in Computer Village, N30,000 per square metre in Ikorodu and between N40,000- 60,000 per square metre on Ikorodu Expressway, amongst others,” it indicated.

It noted that land values spiked in Ikoyi from N600,000 per square metre to N900,000 per square metre, indicating an increase of 50 per cent.

It continued, “In Banana Island, it increased from N1.3m per square metre to N1.50m per square metre, showing an increase of 15.38 per cent. A 4-detached house in Parkview increased in price from about N300m in 2022 to about N500m in 2023, indicating an increase of 60 per cent.

“Surulere does not have typical open plan office spaces but fixed spaces in apartments that attracted N1.60m N1.80m per annum on the average in 2023. Most of the Grade A Office Buildings are located on Lagos Island, notably Victoria Island, Ikoyl, and Lekki Phase. They are doing pretty well because of the excellent environment they offer for business.

“They are often fully or nearly occupied. Seven such prominent buildings in Lagos are Victoria Mall Plaza 2, Civic Center Tower, Eko Tower 1, Pier Point all in Victoria Island and Rising Sun in Ikoyi during the period of study recorded 100 per cent optimal occupancy rates while Heritage Place and Temple Tower located in Ikoyi recorded 94 per cent and 93 per cent, respectively.”

On Lagos Island, office letting rates witnessed a minimal increase in rental values between 2022 and 2023, the report disclosed.

“While office space on Admiralty Way/Road, Lekki, let in 2022 for between N60,000 – N80,000 per square metre in 2022, it increased to between N80,000-N100,000 per square metre in 2023. However, it stagnated in the other parts of Lekki between 2022 and 2023 at the rate of N50,000-N60,000 per square metre.

“In Ikoyi, rental values are lower on Awolowo Road but high in Old Ikoyi where it rose from between N200,000-N400,000 per square metre in 2022 to between N400,000 and N700,000 per square metre in 2023,” it stated.

According to the Ubosi Eleh & Co. report, rent in Victoria Island, which was between N80,000-N100,000 per square metre in 2022, rose to between N200,000 and N400,000 per square metre in 2023.

It added that rental values remained the same in Banana Island for both periods at the rate of N500,000-N700,000 per square metre.

“Grade ‘A’ office buildings will continue to do well in 2024 because of the niche they have created in this property genre. They control ready demand also influenced by their elite locations. Aside from this, we do not envisage a remarkable change in commercial real estate values in Lagos whether land or rental in 2024. The astronomical cost of construction would also ensure the supply curve remains largely the same,” it declared.