Industrial Real Estate Demand Seen Rising On Logistics, E-commerce

Demand for industrial real estate services will, for years to come, be high, experts have said.

They explained that logistics will upset commercial real estate and that disruption in commercial real estate capital allocation is likely, with industrial property receiving more money and retail receiving less.

Though Laide Agboola, the chief executive officer, Purple, a property development company, sees hope for retail along with office and hospitality sub-sectors, Ayo Ibaru, chief executive officer at Northcourt, notes that there will be a decreased emphasis on physical storefronts and a greater reliance on contemporary e-commerce warehouses that are automated and require less labour.

“The demand is strong, but supply to the quality required remains lacking. The pandemic has established that warehousing and logistics will be critical to the future of trade within Nigeria’s borders, at least,” he said.

He added that as countries reconfigure manufacturing frameworks to increase output, expectations are that the submarket will welcome small to mid-sized services providers.

In a related development, due largely to investors’ confidence in the Nigerian economy which has seen local investors stepping into the gaps hitherto filled by foreign capital, land prices are expected to go up this new year, the experts have predicted.

They note that the new year holds opportunities for the real estate sector as there will be continuous growth in the sector which they recall recorded 3.83 percent growth in Q2 2021 and expanded by 10 percent in Q3 of that year.

It is expected that investments will continue across all property types particularly for residential, healthcare, and industrial (data centers) developments which will increase the sector’s contribution to the nation’s Gross Domestic Product (GDP) and the economy as a whole.

Higher price for land which is regarded as the most resilient asset class is also premised on trends in land prices in the last three years spanning 2019 to 2021.

Land price in Old Ikoyi in 2019 was N436,667 per square meter; N415,000/sqm in 2020 and N550,000/sqm in 2021, representing about a 30 percent price increase. In Lekki Phase 1, land price in 2019 was N184,361/sqm; N198,000/sqm in 2020, and N322,000/sqm in 2021.

Land price in Victoria Island in 2019 was N351,912/sqm; N330,000/sqm in 2020 and N398,000/sqm in 2021. Similarly, in 2019, land price in Ikeja GRA rose by more than 20 percent in three years. In 2019, the price was N262,945/sqm; N295,829/sqm and N360,000/sqm.

Added to this, the experts have also said that land buyers in Lagos may be paying more this year as the state government, as part of its revenue drive, has moved up its property regularization fee.

“The Lagos State government has reviewed fees for property regularisation from 25 percent to over 100 percent in some cases. Governor’s consent fee is fixed at 8 percent of the assessed value with Capital Gains Tax and Stamp Duty at 2 percent apiece. Registration fees are now 3 percent,” Ibaru confirmed.

He also confirmed that land prices are bound to rise this year, noting that land prices grew in almost all nodes they considered in their recent report on the 2022 outlook for the real estate sector.

Leading locations such as Ikoyi traded well over the N500,000/sqm mark with plots in Banana Island reaching N1 million/sqm where it is available.” Land in gated communities attracts a premium for the security benefits that they provide. Prices in second-tier cities such as Benin, Abeokuta, and Ibadan are also projected to spike over the next few years,” Ibaru stated.

Femi Oyedele, a board member of Housing Development Advocacy Network (HDAN), shares Ibaru’s view, stressing that the growth recorded in the sector in 2021 would be sustained.

He added that because the country is entering into an electioneering period, property prices, including land, would spike. “Generally, it is expected that things will greatly look up and politicians will find solutions to the insecurity challenges in the country, especially ahead of the 2023 general elections.

“We are very optimistic that 2022 would be much more peaceful and with that, diaspora’s and foreign investors would be attracted to the sector,” he said.