For investors, 2014 looks good for investment in the commercial sector

With only a couple of weeks to the end of 2013, experts in diverse sectors of the world economy are busy not only taking stock of activities in the out-going year, but also projecting and predicting what the incoming year holds out for potential investors and business planners.

Globally, especially in the emerging economies, the experts say the property market presents an interesting outlook, predicting a good year for property investment in the commercial sector in 2014.

In Nigeria, there is already a kind of revolution in the commercial sector of the property market such that despite the barriers to entry into the Nigerian market which Erejuwa Gbadebo, former CEO, Broll Property Services, summarised as lack of enabling environment to trade, international investors, notably retailers, are warming up to come into the country to invest.

Though there has been lull in the residential segment of the market in the country, the commercial sector has continued to receive interests and, according to Gbadebo, “the retail sector will really move as more and investors are coming in from developed economies to invest here”.

Already, 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 with the Festival Mall in Festac Town, Lagos.

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.

In its latest report on the property market in 2013, Propertywire, an online property publication, quotes Global Property Securities Fund Manager, Jim Rehlaender, and head of property, Duncan Owen, as saying that whatever happens to economic growth, 2014 should be a good year for global property, with high single-digit returns in prospect for selective investors.

Excepting countries like Nigeria, maybe, the publication notes that globally, residential property prices are increasing steadily with the latest worldwide house price index from Knight Frank exceeding its pre-financial crisis high.

“The Knight Frank index is worth taking a look at as it tracks residential prices in 53 countries, including the key emerging markets of Dubai and Hong Kong. The index now stands 4 percent above its previous peak in the second quarter of 2008 and 12.7 percent above its financial crisis low in the second quarter of 2009,” Clay Nance, editor of the publication, wrote under the headline ‘Global property markets looking good going into 2014’.

Nance noted that over 69 percent of the countries tracked by the index recorded positive growth in the year to September 2013, yet just two years ago this figure was just 55 percent.

Rehlaender and Owen 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, pointing out that even if economic growth proves disappointing, the absence of new supply coming onto the market will be good news for property values, given the strength of investor demand.

They add that if the global economy takes off, investors should also benefit from rental growth, pointing out, however, that the challenge for property investors in 2014 will be to differentiate between those companies whose valuation fully discounts the outlook and those where there is further value to be unlocked.

By: Chuka Uroko