Residential vacancy rate rises 32% as demand softens on falling oil price

As the economic impact of falling oil price spreads, the property market has been significantly impacted with rising vacancy rate resulting from subdued demand, especially at the high end market where oil and gas companies and corporate bodies are the major demand drivers. Between the second quarter of 2014 and January this year, the level of emptiness in the residential and commercial segment of the market has been so remarkable that at the high end markets of Ikoyi, Victoria Island, Lekki in Lagos, and Asokoro, Wuse and Garki in Abuja residential vacancy has increased to 32 percent. “Residential vacancy factor on Victoria Island increased to 32 percent in January while commercial vacancy factor went up to 17 percent within the same period”, says Bismarck Rewane, the CEO of Finan- cial Derivatives Company Limited in his monthly economic review recently. He added that residential vacancy factor in Lekki and Ikoyi increased to 35 percent and 11 percent, re- spectively, while commercial vacancy rate rose to 41 percent and 3 percent in Le- kki and Ikoyi, respectively, pointing out that Ikoyi was still predominantly residential even though new commercial developments were springing up. In Abuja, Obi Ejimofo, the managing director of Lamudi Nigeria—an online property portal—told BusinessDay that, on account of the twin problems of falling oil price and the forthcoming general elections, demand had been quite low, adding that it was good time to invest in that market. BusinessDay had reported that vacancy rate had increased in the high brow areas of Lagos, particularly Ikoyi where Omochiere Aisagbonhi, the president/ CEO of Omais Investment Group, blamed the vacancy rate on the greed of land- lords who demanded as much as $150,000 annually for a three-bedroom apartment. “With the new Lekki Ikoyi Bridge, tenants dis- covered that, by just cross- ing the bridging, they could live in Lekki Phase One where rents were almost half of what Ikoyi landlords demanded”, he added. On his part, Femi Akintunde, the MD/CEO of Alpha Mead Facilities Management and Services Limited, explained that the vacancy rate in Ikoyi was as a result of the decline in oil industry activities, leading to many of the oil companies monetising their accommodation strategies for their staff. In the short term, Re- wane noted that risk of political violence might delay investment into the real estate sector, adding however, that construction activities were expected to pick up after elections. “Further decline in oil revenues will curtail government spending on capital projects, the usual lease/ rent would continue but at a slow pace”, he said, pointing out that the general elections would affect pending property developments due for completion in 2015. He stated that though there were slow construction activities for highly capital-intensive projects because funds were channelled into elections instead of new contracts, pending commercial developments such as Heritage Place, Ikoyi; Civic Centre Towers; Jabi Lake Mall, Abuja, among others, were still on schedule for completion in 2015. The retail sector, he said, witnessed increase in shopping traffic during the holidays which was driven by increased demand for groceries, adding that on- line retailing received a major boost partly due to attractive promos advertised. Ejimofo told Business- Day that in terms of traffic and with the number of estate agents they worked with and the number of properties listed on their site they saw growth of 400-500 percent, explaining that the growth was driven by people getting to understand and like the online platform better.