Political, other shocks slowing real estate investment in 2014 – Experts

Close watchers of Nigeria’s real estate market say 2014 will be an interesting year in which investment will grow a lot more than was seen in 2013.

They posit that the market presents an interesting outlook for investment in the commercial sector in the new year.

They add however that in the course of the year, there will be some shocks, which they explain would be coming from political activities and macro-economic indices.

According to an analyst who did not want to be named, with the planned devaluation of the naira, people are going to adjust and prices are likely to to go up. He added that interest rates would rise and if that happens, it means construction costs would be higher, which will be bad for real estate.

“2014 will be an election year; there will be too much cash in the system, which is going to affect everything because that is going to trigger inflation. Depending on what happens on the political front, this period will affect the rate at which people come into the country to do business. People may decide to wait until the election is over. The election year may affect investment generally”, he added.

By and large, he emphasised, there was enough investment interest in real estate going into 2014, “but concerning those potential shocks, there is a lot to watch out for”.

Some projects have taken off in the commercial sector and many of them would be entering the market by the turn of 2014 and beyond, and will be offering investment opportunities to savvy investors. Actis, an international private equity investment firm, is leading the pack in retail centres development, with the Jabi Lake Mall in Abuja and Ado Bayero Mall in Kano, while UPDC is coming up with the Festival Mall in Festac Town.

Actis is also hands-on with the Heritage Place—a 14-floor office complex that is touted as Nigeria’s green building. Oando Plc, Standard Chartered Bank and RMB Westport are also sponsoring the $182 million office building called ‘The Wings’ while another 16-floor office complex is being planned by the promoters of Civic Centre.

Taking a global look at the market, Jim Rehlaender, Global Property Securities Fund Manager, and Duncan Owen, head of property in the same company, predict that whatever happens to economic growth, 2014 would be a good year for the global property market.

The duo who were reported in the latest edition of Propertywire—an online property journal—say the big unknown in 2014 is whether an economic recovery globally continues to gain traction, particularly in the US, China and Europe. Either way, they believe that property looks well placed.

Looking back to the property market in 2013, Erejuwa Gbadebo, a real estate consultant, said it was a good year, especially for commercial real estate, explaining that “everybody goes for the commercial real estate because that is where growth is, as against residential which is perceived to be not profitable; commercial real estate is attractive and that is why everybody goes there”.

Gbadebo observes however, that this interest could be a bandwagon thing which may lead to over-supply in the short to medium term. “People are still speculating because most of these office buildings coming into the market are not leased. People are just hoping that one day, they will be leased”, she said