the reality of recession and the impact on the nigeria real estate sector

THE REALITY OF RECESSION AND THE IMPACT ON THE NIGERIA REAL ESTATE SECTOR

Residential Auctions Company

About Us

RAC is a real estate research firm that specializes in providing

integrated research services for the local real estate market in Lagos

It was established in 2010 and incorporated as a company in 2011

under the Companies and Allied Matters Act of 1990

We regularly collect data and conduct surveys on the property market

which we use to produce annual market reports and also provide

advisory and consulting services to our clients

Our mandate as a company is to provide easy access to information

on the local property market in Lagos and across other major cities of

Nigeria

Part 1 – State of the Nigerian Economy

Quarterly GDP, Real Estate and Building & Construction Growth

Source: Nigerian Bureau of Statistics and RAC

-5%

0%

5%

10%

15%

20%

25%

30%

Q1 2

011

Q2 2

011

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

Q1 2

013

Q2 2

013

Q3 2

013

Q4 2

013

Q1 2

014

Q2 2

014

Q3 2

014

Q4 2

014

Q1 2

015

Q2 2

015

Q3 2

015

Q4 2

015

Q1 2

016

Q2 2

016

Q3 2

016

Real Estate Building & Construction GDP

Nigerian Real Estate Sector

0%

10%

20%

30%

40%

50%

60%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2000200120022003200420052006200720082009201020112012201320142015

Source: Central Bank of Nigeria and RAC

GD

P A

T C

UR

REN

T B

AS

IC P

RIC

ES

(N

AIR

A M

ILLIO

N)

Year –

On

–Y

ear

Gro

wth

Annual GDP, Real Estate and Building & Construction Growth

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real Estate Building & Construction GDP


Real Estate and Building & Construction Contribution to GDP

0%

2%

4%

6%

8%

10%

12%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Real Estate/GDP Building & Construction/GDP


Foreign Direct Investment in Nigeria

-50%

0%

50%

100%

150%

200%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Foreign Direct Investment (US$ Millions) (LHR)

Annual Foreign Direct Investment Growth (RHS)


Rising Cost of Major Cement

0

500

1,000

1,500

2,000

2,500

3,000

Ap

r-10

Au

g-1

0

Dec-

10

Ap

r-11

Au

g-1

1

Dec-

11

Ap

r-12

Au

g-1

2

Dec-

12

Ap

r-13

Au

g-1

3

Dec-

13

Ap

r-14

Au

g-1

4

Dec-

14

Ap

r-15

Au

g-1

5

Dec-

15

Ap

r-16

Au

g-1

6

Nair

a


Part 2 – Present Situation

Impact of Recession on Real Estate Sector

• Office Sector

Supply glut causing prime office rents in Ikoyi and Victoria Island to fall

Landlords are more flexible with rents which can now be paid in the Naira equivalent

More flexibility to negotiate reduced rents

Quarterly / Bi-Annual rent payment now acceptable

Reduced escalation clauses which is now around 5%

Landlords offering various incentives to attract tenants such as tenant

Low take-up of space

Rent-free periods

• Residential Sector

Price falls across major markets

High vacancy/Low occupancy rates in highbrow areas

Waning demand

Slow pace of construction projects

Impact of Recession on Real Estate Sector

• Retail Sector

High number of retailers of leaving the country due to low sales and high dollar de-nominated rents e.g. Truworths and Woolworths

Developers are scaling back on the size of their retail projects i.e. reduction in mall size

Rent-free periods offered to tenants to reduce the impact of slow sales

• Leisure / Hospitality Sector

Drop off in the number of business visitors or investors

Increase in the number of Nigerians patronizing local leisure centers

• Industrial Sector

Faring slightly better than other sectors

Lagos Office Rents

Prime Markets Secondary Markets

NGN 0

NGN 10,000

NGN 20,000

NGN 30,000

NGN 40,000

NGN 50,000

NGN 60,000

Lekki Lagos Island Ikeja Yaba

2014 2015 2016 Q1 2016 Q2 2016 Q3

$0

$200

$400

$600

$800

$1,000

$1,200

Victoria Island Ikoyi

2014 2015 2016 Q1 2016 Q2 2016 Q3

Source: Broll Research and RAC

RAC Lagos House Price Index

0

20

40

60

80

100

120

140

160

180

200

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Lagos Island Lagos Mainland

NSE stock market

crash (Margin Loans)

Global crude oil

price drop – Naira

Recession

Source: RAC

Global economic

recession

CBN bank

reforms resulting

in credit squeeze

Lagos Annual House Price Growth

Source: RAC

-30

-20

-10

0

10

20

30

40

2008 2009 2010 2011 2012 2013 2014 2015 2016

Lagos Island Lagos Mainland

%

Annual Supply of Housing Stock in Lagos

-60

-40

-20

0

20

40

60

80

100

0

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2012 2013 2014 2015 2016

Annual Supply (LHS) Annual Growth (RHS)

No

of

Un

its

%

Source: RAC

Part 3 – Looking Beyond (2017 -)

Annual Construction Starts in Lagos

-80

-60

-40

-20

0

20

40

60

80

100

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2010 2011 2012 2013 2014 2015 2016

Construction Starts (LHS) Annual Growth

No

of

Un

its

%

Source: RAC

Scale of Housing Projects

Source: RAC

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016

1 - 9 10 - 29 30 - 49 50 - 99 100 - 499 500+

Office Development Pipeline

Source: RAC

Name of Development Location No of Floors

Net

Leasable

Area (sq.m) Type Year Developer

Sogenal Building Ikoyi 14 11,560 Mixed-Use Sogenal Group and Eris Property Group

Lakepoint Towers Ikoyi 10,11 12,600 Office 2016 Lake Point Limited

Kingsway Tower Ikoyi 15 Mixed-Use 2017 Sky View Towers Limited

Alliance Place Ikoyi 11 6,887 Office 2016 Edimara Properties Limited

Desiderata Ikoyi 6 4,700 Office 2018 Funtierra Liimited / Scarsdale Developers Limited

Zekwes Office Complex Lekki 5 1,500 Office 2016 Zekwes Ventures Limited

21st Century Technology BuildingLekki 6 Mixed-Use 2017 21st Century Technology Limited

Office Block Lekki 5 Office 2017 Skyhomes Properties Limited

The Waves Victoria Island 10,12 - Office EcoBank

Cornerstone Tower Victoria Island 12 12,000 Office 2017 Cornerstone Insurance

Wings Victoria Island 15, 15 27,000 Office 2016 Oando

Harbour Point Victoria Island 9 17,000 Mixed-Use 2018 Asset Management Group

Eko Towers 2 Victoria Island 27 Mixed-Use 2016 Chagoury

Bloomsbury Victoria Island 6 10,000 Office Dreamspace Development Company Limited

Madina Tower Victoria Island 16 8,140 Office 2017 Athena Capital

Techno Oil Head Office Victoria Island 6 Office 2016 Techno Oil Nigeria Limited

Proposed Office DevelopmentVictoria Island 8 Office 2018 Orange Line Limited

Jenkins Place Victoria Island 8 3,000 Office 2018 Orangeline Limited

Greystone Tower Victoria Island 17 Office 2018 Platform Petroleum Limited

Diamond Bank Head Office Victoria Island Office 2017 Diamond Bank

Pacific Towers Victoria Island 20 4,000 Mixed-Use 2018 Deluxe Residences

One Zero Five Place Victoria Island 14 Office 2018 Primrose Developments

Victoria Mall Plaza 3 Victoria Island 15 Mixed-Use 2018 UPDC

COD Trinity Towers Victoria Island 14 Mixed-Use City of David Church

Retail Mall Development Pipeline

Source: RAC

Mall Location

Net Leasable

Space (Sq.m) Completion Year

Maryland Mall Lagos 7,000 2016

Jabi Lake Mall Abuja 27,000 2016

Owerri Mall Imo 9,950 2016

Onitsha Mall Anambra 11,000 2016

Novare Lekki Lagos 22,000 2016

Novare Apo Mall Abuja - 2016

Asokoro City Mall Abuja 28,000 2017

Novare Gateway Mall - Phase 1 Abuja 15,000 2017

Royal Gardens Mall Lagos 30,000 2017

Asaba Mall Delta 7,500 2016

Mountainview Abuja 10,000 2016

Twin Lakes Mall Lagos - 2018

Hospitality Development Pipeline

Source: RAC

Name of Hotel Location No of Keys Completion Year DeveloperLe Meridien Grand Towers Ikoyi 317 2019 Starwood Group

Lagos Marriot Hotel Lekki Phase 1 395 - Bluewater Development Company Ltd

The Art Hotel Victoria Island 46 2017 Dreamspaces Development Company Limited

Marriott Lagos Waterfront Hotel Victoria Island 200 2018 Quantum Capital

Marriott Hotel Ikeja Ikeja GRA 251 2018 Sifax Group

INVESTMENT IN REAL ESTATE DURING A RECESSION

Source: RAC

Five reasons to invest in real estate

Capital Appreciation

Added Value

Low Volatility

Inflation Hedge

Collateral / Security

IMF FORECAST

THE END

Confidential

RAC reserves the exclusive

rights to all the contents and

data presented in this

document and re-distribution

is not permitted without prior

consent.