The CEO of Northcourt, Ayo Ibaru says real estate investors will adopt a wait and see approach in the first quarter of next year as they focus on the announcement and execution of the 2025 budget. He notes currency pressures remain a major factor driving the cost of construction materials and rent while expressing optimism on sustained demand growth in warehousing and industrial segments of the real estate market.
The CEO of Northcourt, Ayo Ibaru says real estate investors will adopt a wait and see approach in the first quarter of next year as they focus on the announcement and execution of the 2025 budget while he notes currency pressures remain a major factor driving the cost of construction materials and rent while expressing optimism on sustained demand growth in warehousing and industrial segments of the real estate market. Take a look. The CEO of Northcourt, Ayo Ibaru says real estate investors will adopt a wait and see approach in the first quarter of next year as they focus on the announcement and execution of the 2025 budget. He notes currency pressures remain a major factor driving the cost of construction materials and rent while he notes currency pressures remain a major factor driving It did mean there are now more opportunities to invest. I would like to look at the performance of the segments this year vis-a-vis how it compares to last year. What were some significant changes that you noticed? Okay so we've always said land is a strong investment class but because of the increasing instability especially in Nigeria's economy, we saw more investment and that meant that more people decided to invest in land banks and so year on year the numbers have gone up. Residential construction or development as it's called declined year on year. The reason being that not many people were quick especially around the mid-market to invest in housing as a capital good. Now of course the housing deficit and the growing population meant that for rent yes people would take up apartments so in terms of taking up for rent yes that went up but in actual supply there was a decline year on year. I think retail has struggled maybe the most largely because asset size, basket size of your average consumer has reduced and that's because purchasing power has dropped and that meant that on aggregate most retailers are unable to get full occupation and that's because the various shop owners are unable to pay the right kind of rents. So retail has pretty much struggled which is why as we have seen in many of our studies it does make sense to go with the mixed use model now. Warehousing has also done well. Warehousing and industrial year on year has continued to increase especially as businesses have decided to go with the logistics model especially in Nigeria again where you see the dark kitchen model grow. Firms like Childeck, Glovo and so on and so forth. I think just to round it up healthcare has also seen quite a bit of demand largely because it's increasingly expensive to go for healthcare checkups abroad and the changing global framework of healthcare provision especially in the US and the UK waiting times being extended has meant that reverse tourism benefiting Nigeria is the way to go. So you have quite a number of procedures that ordinarily would have been done in the US, UK, Canada are now being done in Nigeria. So that's a bit of what we've been seeing year on year. Yeah what about the development pipeline here now looking forward beyond this year and how people are strategizing for the Nigerian market? Yeah so development pipelines as far as our data shows is strongest with hospitality. That'll be big brand name hotels Marriott, Radisson and even Transcorp and then of course mid-market hotels and that's because even since the pandemic we've continued to see demand for hotels and restaurants and lounges. Again not many Nigerians are traveling abroad as much as they used to and the pandemic did lead to the concept called staycation right where people just stay in country and have their vacations there and so that has become a regular occurrence in the lives of many a Nigerian. So that's where the pipelines are as far as hospitality is concerned. Now we do have a bit in mixed use and we also see interestingly in the arts and culture and creative space where because of funding from global media houses you're now seeing the development of mini film villages and that is again a place where you see a lot of music videos being shot and movies being shot and that is increasing the demand. You still have a few grade A offices but these are being built by owner occupiers meaning yeah. Yeah but what about the shuttlet because we saw that traction last year especially towards the festive period we've seen quite a number of players take advantage of that demand here. Are we seeing similar traction this year? Yeah so a few years ago Mastercard did come out with a report in partnership with a few entities which concluded that Lagos in Nigeria was the fastest growing market in Africa for shuttlet and that was a few years ago and then the market continued to improve and then it peaked and then it's now becoming more mature markets. Now one reason why you see shuttlet apartments increasing in demand is because of the renewed demand for big name brand hotels, hospitality concerns so that has led to the demand for grade B hotels, your 20 to 50 room concerns which has now led to demand for shuttlet and so the question now becomes what kind of shuttlet do you want to develop because quite a few are failing and it takes quite a bit of work to see that the shuttlet you put up brings in respectable returns because again it does fall under what we call operational real estate so it's really a question of how much quality can you put into the shuttlet. The closer you are to the city centre the more the facilities you have to provide and the higher the quality of the management that you have to put into your shuttlet or else you'll probably be empty 60 to 65 percent of the average year. Now around public holidays and you know weekends as you get towards the end of your average year there will be increasing demand for shuttlets but the objective is to be occupied at least 70 percent yes and to do that you need to get a few. Yeah because now I'm looking at the strategy for the local players in this in the real estate and how they're looking to expand. We just had a recent list in my introduction to the stock exchange here in Nigeria. Hadon McCall one of the players here coming to tap into the market here. I'd like to get your thoughts around this as a strategy for getting funds from players and if you think we could see possibly more listings down the line. I do see more listings down the line and I think long-term funding is what works best for real estate development. The average cycle for your real estate. But we don't want to go to the stringent rigors of the listing requirements. The listing requirements are even a sign that the market is regulated and it does send a signal that the NGX knows what it's doing. It's willing to protect customer or fund manager funds and it does bring in more funding. That was Ayo Ibaru, CEO of NorthQuoth.
Theme: Real Estate Investors' Cautious Approach for 2025 Budget and Positive Growth in Warehousing and Industrial Segments
Real estate investors in Nigeria are gearing up to adopt a wait-and-see approach in the first quarter of 2025 as they closely monitor the announcement and execution of the upcoming budget. Ayo Ibaru, the CEO of Northcourt, shared insights on the current market dynamics in a recent interview on CNBC Africa. Ibaru highlighted that currency pressures continue to be a significant factor influencing the cost of construction materials and rent in the real estate sector. Despite these challenges, he remains optimistic about sustained demand growth in the warehousing and industrial segments of the market. Reflecting on the performance of different real estate segments, Ibaru emphasized the resilience of land investments amidst economic uncertainties. He noted a rise in investment in land banks due to increasing instability in Nigeria's economy. Residential construction, on the other hand, experienced a decline as fewer investors were willing to venture into housing development. However, there was an uptick in demand for rental apartments, driven by the persistent housing deficit and population growth. The retail sector faced hurdles primarily due to reduced purchasing power among consumers, leading to struggles in maintaining full occupancy rates. Ibaru suggested that adopting a mixed-use model could be a viable solution for retail players in the current market environment. On the positive side, warehousing and industrial segments saw continuous growth, fueled by the logistics industry's expansion in Nigeria. Companies like Childeck and Glovo were mentioned as key players driving this trend. Moreover, the healthcare sector witnessed an increase in demand, with more Nigerians opting for local healthcare services over overseas alternatives. Ibaru highlighted the cost-effectiveness of seeking medical procedures within the country, attributing the shift to prolonged waiting times and evolving healthcare provisions in foreign countries. Looking ahead, Ibaru discussed the development pipeline for the Nigerian market, with a strong emphasis on the hospitality sector. He noted a growing demand for big-brand hotels and mid-market accommodations, fueled by the trend of staycations and reduced international travel. Mixed-use developments and investments in arts, culture, and creative spaces were also identified as emerging opportunities in the market. Addressing the traction in the serviced apartment sector, Ibaru acknowledged the increasing demand for grade B hotels and serviced apartments, driven by the hospitality industry's growth. He emphasized the importance of quality and strategic location in maximizing returns from serviced apartment investments, considering the competitive nature of the market. When discussing local players' expansion strategies in real estate, Ibaru expressed optimism about the potential for more listings on the Nigerian Stock Exchange. He emphasized the benefits of long-term funding for real estate projects and viewed the listing requirements as a positive signal of market regulation and investor protection. Ibaru's insights shed light on the evolving landscape of the Nigerian real estate market, highlighting both the challenges and opportunities that lie ahead for industry stakeholders.
"I do see more listings down the line and I think long-term funding is what works best for real estate development. The average cycle for your real estate."
['Real Estate', 'Nigeria', '2025 Budget', 'Northcourt', 'Investment', 'Warehousing', 'Industrial Segments']