Post Covid 19 effect on different sectors in Nigerian Real estate
Upon close inspection of the common types of commercial real estate following my keen study of several books, I have been able to come up with various sectors of commercial assets that may be badly injured when the present lockdown is called off.
I am inclined to mention that additional inspiration to write this article developed after reading my mentor’s view (Tayo Odunsi) on this topic and watching Mr Olawale Ayilara on different ‘IG live page’ interviews. The successes of these inviduals in the real estate industry fuels my passion every time, and as Mr Ayilara would say “harness the opportunity of the internet and dig deep and research on what you love to do”.
Before I proceed into the proper body of the article, it is essential to the context that I briefly introduce the readers to different sectors of commercial Real Estate(RE) which includes:
(a) Office RE- Office buildings are generally categorized into two types: The Urban and Sub-urban.
(b) Retail RE- It comprises properties that provide shelter to retailers. A place where they can comfortably sell or display their goods and services for daily transactions. It can either be multipennate or stand-alone buildings. Examples are Shoprite, single restaurants etc.
© Industrial RE — Comprises of warehouses, heavy manufacturing, research and development facilities.
(d) Residential RE- Includes multifamily/single family apartments.
(e) Hospitality RE — majorly involves the Hotel industry which can be either boutique or flagged.
(f) Special Purpose RE — As the name implies, it involves facets distinguished by a unique and unusual quality. Examples include churches, mosques, public parks etc.
The present occurrence of forestalling deals is a major concern for real estate agents and brokers. This is simply because some investors would tentatively take a step back on account of the uncertainty of this pandemic. Understandably, the majority are not comfortable with virtual inspections and may want to rescind/pause their decisions to invest in real estate in favour of stocks, bitcoins and other short investment alternatives. On a personal front, I have had difficulties in closing 3 to 4 deals no thanks to the economic tremors set in motion by the pandemic and hopefully I can still get to close them. However, I’m merely being practical in acknowledging that the chances may be even slimmer when Covid-19 is past us.
The office sector would not be able to escape suffering a major blow. The new business landscape of working from home and virtual meetings via the Zoom computer program is noticeably changing views on the major importance of renting office space. With this new spotlight on the advantages and effectiveness of working from home, the demand for office spaces based on modest estimations is expected reduce to about 20% (Note: This figure may increase in future).
We have another casualty in Retail real estate especially to those who didn't have a strong digital presence before Covid-19. Consumers are having to adapt to online retailing. The emergence and continuous trust in e-commerce would strengthen by about 50% affecting retail sectors that have formerly placed an over reliance on traditional marketing in their four cornered stores for rent renewals. There would be need for the retail owner to increase future capital expense reserve because some outlets might not be able to renew and would have to vacate the stores as a consequence. To foster cashflow, the reserve might be an alternative for temporary cashflow.
Industrial real estate- Ideally, this sector would rise exponentially if the emergence of e-commerce or online retailing overrides the retail sector because there would be high demand for storing goods and thus an increased need for facilities like a warehouse.
The single/residential lettings under the residential sector are currently not operating because of the widespread government imposed shutdown on movement and non-essential activities. And one of the implications of limited to zero movement in some instances means that relocations are on hold. After Covid-19, an analysis of the aftereffect suggests a downward trajectory of relocations and it may be some time before it springs up again. Projects involving ongoing constructions would also be badly affected by inflation and the devaluation of the Nigerian currency.
Industrial real estate- Ideally, this sector would rise exponentially if the emergence of e-commerce or online retailing overrides the retail sector because there would be high demand for storing goods and thus an increased need for facilities like a warehouse.
Hospitality sector- this sector ought to be the most affected. Not long ago I engaged the AM investors and realtors idea group, a group I pioneered for sharing real estate investment tips and strategies with about 170 members and the majority agreed that this sector would be badly hit. It has unexpectedly found itself wallowing for about 6 weeks without sustainable operations as the lockdown has really diminished business and there is no viable alternative to their clients. Don’t you agree that it would be the slowest sector to pick up after the pandemic?
Special purpose RE- The emergence of the lion himself idaboski on several social media handles, I hope we can all use this medium to search our minds deep and ask the most difficult questions.
I borrow this quote from my mentor, Tayo Odunsi in an article published by THIS DAY saying “land investment in a developing and gated estates will be a good store of value if you are liquid right now”. Land investment rarely depreciates or reduces in value especially if it is located at a strategic and fast developing vicinity. Humbly, I am driven to express confidence that it is the safest form of investment in this global economic collapse. It might slowly appreciate after Covid-19, but I can speculate from my research and studies that it would pick up faster than the other aforementioned sectors.
AM Realty is devoted in providing quality Real estate Consultancy service to all her esteemed customers and prospective clients, as earlier said land is about the safest investment right now. just before I drop my pen, let me remind you that inflation has risen to about 12%? and industry experts predicts it could rise to about 19% by the end of the year, 5% return on any fixed investment would be at a loss of about 12–14% at the end of the year.
Written by Adebolu Mayowa.
Founder of AM realty.
08163992451.
