Residential vacancy rates in Nigeria increase by 41 per cent

Although the Nigeria real estate market has continued to witness improved activities from last year’s performance, a new report released by Northcourt has shown an increase in the vacancy rates.

In the half year report known as Nigeria Real Estate Market Review, released at the weekend, Ikoyi and Katampe in Abuja topped the list of residential vacancy rates in the country with 41 per cent and 37 per cent respectively.

Also, Victoria Island had 23 per cent, followed closely by Lekki with a 22 per cent vacancy rate.

Oniru, and Apo, Abuja also had 15 per cent and 14 per cent respectively, while vacancy rates in Port Harcourt moved slightly when compared with End of 2018.

Old Government Reserved Area, GRA Phases 1, 2 and 3 recorded vacancy rates of 7 per cent , 9 percent , 9 percent and 15 per cent respectively, while Magodo Phase 11, Lagos has one of the lowest vacancy rates of one per cent.

The low vacancy rates recorded in many parts of Ogun State, South-West Nigeria, the report said was largely due to the affordable cost of housing in its capital city – Abeokuta. High to mid-income areas such as Ewang Housing Estate, Ibara Housing Estate, and Asero Housing Estate have vacancy rates of 1 per cent, 9 per cent and 14 per cent respectively.

Affordability, serene environment, adequate infrastructure, and proximity to both federal and state secretariat offices have been identified as major drivers of the high occupancy levels.

Low-mid income area, like Kuforiji, is a promising residential neighbourhood with a number of pipeline projects such as government-led Orange Valley Estate and AAK Degun Mitros.

Oyo’s leading gated community in Ibadan (another South-Western state) – Samonda Estate (Aerodrome) – is comprised mostly of 4- & 5-bedroom houses and is 98 per cent owner-occupied. Other prime locations such as New and Old Bodija have lower occupancies.

On the Office space, the report said, rents have continued to gradually decline in the Grade A office market. Three towers – Cornerstone, Greystone, and Kingsway brought 12,000sqm, 11,190sqm and 13,317sqm of leasable office space to the market. With Heritage Place, Wings Complex and Alliance Place recording vacancies circa 55 per cent.

In Maitama, rental values are considerably higher than in other areas in the nation’s capital – Abuja. Office spaces on average go ₦45,000 – ₦60,000/sqm. Major tenants include pharmacies, boutiques, and travel agencies. Commercial vacancy rates currently stand at 12 per cent. Rentals in the Utako area average ₦35,000/sqm with commercial vacancy rates at 52 per cent . More development pipelines are in the area as land prices average ₦112,000/sqm. In Wuse 1, rentals for office spaces go for ₦36,000/sqm on average. Shops go for slightly lower – ₦35,000/sqm.

The growing demand for coworking spaces, especially in Lagos state, has also encouraged conversions of grade B officers. Service providers are moving more into the ‘Space as a service’ model – upgrading, fitting out and managing grade B spaces to meet client specifications.

Strong occupancy levels in mainland areas like Yaba have only mirrored demand on the Island where spaces in Victoria Island and Lekki lead the charge.

The millennial demographic, tech start-ups, women-led enterprises and SMEs have remained the leading drivers of demand for coworking office space.

The recently launched Delta State Innovation Hub has also increased the demand for co-working in South-Eastern Nigeria. Leadspace partnered with FCMB to open Hub One, a co-working space in Yaba, Lagos. Grade
Year over year (YoY).

According to the report, security has also grown as a critical selector tool in the residential market.

Secure gated communities are priced higher than estates perceived to be less so as investment thinking in property continues to shift.

The residential real estate market is also gradually picking up as tenants pushed for better deals.

Landlords, the report said, is making little or no reductions. Mini flats, 1 and 2 Bed flats remain favourites.

According to the report, Coworking has continued to grow as business owners are unable to meet up to the dollar rent obligations for Grade A office space.

Most ongoing prime office developments or those that have been delivered in recent years are a testament to the fact that green buildings have come to stay.

Also, demand for Grade A warehousing, the report said has continued to be the case, especially in Lagos state as retailers look to circumvent the economic loss from the city’s traffic situation.

The land has continued to reprise its role as a stable investment, rising YoY in almost all the areas considered. Average prices in Ikoyi, is N450,000 Lekki Phase 1, is N200,000, Victoria Island, N340,000, while it goes for N30,000 in Sangotedo.

In his summary of the report, Northcourt Chief Operating Officer and Director, Real Estate Research & Advisory Lagos, Nigeria, Ayo Ibaru Noted that the demand for property assets will continue to mirror general market conditions fuelled by the efficiencies gained through technological advancements.

Artificial Intelligence, Virtual Reality, and Proptech, he said are changing our interaction with the real estate value chain – from design to construction and completion.

“As materials science breakthroughs force their way into existing construction frameworks, we can safely expect improvements.

Green buildings continue to feature in conversations, waiting for a general traditionalist market to catch up”, he noted. Ibaru stressed that land values have continued to appreciate and the Grade A office market’s struggle with unhealthy vacancy rates remains the case.

“Coworking models are also evolving and, for the first time, we will be including property prices from emerging cities for your investment consideration”, he added.

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