Eko Atlantic City leads prime land price increase in Q1 2017

In spite of the challenges in the property market, especially in the prime residential and office space segment of the market, prime land in the past one year to date has recorded positive price movement , showing an average price increase of 22 percent within the period.

Close market watchers have attributed this to significant  increase in Diaspora remittances which a Central Bank of Nigeria (CBN)  estimate puts at N25 billion in the last 12 months. Emmanuel Obire, estate developer and CEO, Multi-purpose Infrastructure Development Company (MIDC), says about 10-15 percent of this amount went into real estate investment mostly in landed property.

Nigerians in Diaspora have been quite bullish in investment back home because of the stronger currency advantage which they have over weak naira which has been, however, making a good showing in the forex market in the past couple of months following CBN’s spirited intervention.

In the first quarter of this year, Eko Atlantic City where land prices are benchmarked in dollars stood out as an outlier, leading price increases in prime locations such as Ikoyi, Banana Island, Victoria Island and Lekki.

As against Banana Island’s 23 per cent price fall from their highs of N440,000/sqm achieved in August last year to a current price of N373,000/sqm, land price in Eko Atlantic City has gone by about 17 percent to $1,700 per square metre (about  N523,000/qm), up from about $1,450/sqm last year.

 A first quarter (Q1) 2017 report on Lagos property market by MCO Real Estate (MCORE) notes that whereas Victoria Island land price has dropped 7 percent to N379,000 (US$1,244)over the year, Ikoyi  appreciated 31 percent (year-to-date) Banana Island, 4 percent (YTD) within a tight band at N373,000 (US$1,226), N359,000 (US$1,181) respectively.

MCORE is a real estate investment and advisory firm that provides services and solutions to a global audience of investors and developers to enable them achieve their real estate investment objectives primarily in Nigeria. Its in-depth research and rigorous due diligence enable it to make the right investment decisions at the right time in the volatile markets in which it operates.

The company notes in the report that Lekki Phase 1 has also appreciated 34 percent (YTD) and Oniru, 14 percent (YTD)  within a lower priced band at N207,000 (US$579) and N176,000 (US$681) respectively.

Munachi Okoye, the compoany’s CEO, notes that  “Lekki Phase 1 in general and Admiralty and Freedom Way in particular have benefitted from the road widening and re-surfacing of both roads with Admiralty Way now being seen as a major commercial thoroughfare leading to a considerable 14 per cent increase in advertised land prices over Q1 and a 34 per cent increase over the year”.

 According to him, the residential market , which is having serious challenges at the upper  tier with falling demand and rising vacancy rate, is supported by demand from the middle market segment consisting of primarily terraced houses, town houses and flats priced at between N25 million and N60 million ($82,000 – $198,000).

“In the upper tier of the residential market, which is our point of operation, including Ikoyi, Victoria Island, the Oniru axis and, to an extent, Lekki, if you segment those areas, you see that in Ikoyi, for instance, 40-50 percent of the high rise buildings appear to be vacant. There is a very high vacancy rate in this area. Some of the buildings that appear to be 100 percent empty are generally old buildings which also appear to be completely abandoned”, noted Udo Okonjo, CEO, Fine and Country.

Okoye agrees, stressing that the premium residential market consisting of property above N120 million ($393,000) continues to suffer from a fall in consumer income coupled with a fall in demand from the corporate leasing market, particularly impacting the Ikoyi prime residential apartment leasing market.

He  points out however, that middle market housing built with an eye for quality and priced competitively continues to find a market from buyers. The primary areas of growth for residential housing are the Lekki-Ajah axis while the on-going investment in transport infrastructure along the Lagos – Badagry axis consisting of the Blue Rail Line, the Lagos-Badagry Expressway and the Badagry Deep Sea Port and Free Trade Zone suggests potential for strong growth along that corridor also.

The commercial office market continues to remain in a slump brought about by the strong growth in supply over the last three years coupled with the fall away in demand on the back of the contraction in economic growth over the same period.

Okoye notes that there is currently  about 544,000 square metre of institutional commercial office space with 8 percent of this amount added in 2016 and 20 per cent added over the last two years alone primarily in Ikoyi and Victoria Island. “As the market re-aligns itself to the current state of affairs, both landlords and tenants are seeking the means to protect their interests by reducing costs and increasing profits in the current challenging economic environment”, he hopes.

He notes that intense negotiations are at play as corporate occupiers seek to convert dollar denominated rents to naira with a wide margin existing between the landlord’s ideal of a conversion at a parallel market rate and the tenant’s preference to convert at official market rates.