It is not news that with the social distancing policy and stay at home order, there is unimaginable decrease in retail foot traffic, and high office and hotel vacancies to the extent that some countries have converted these facilities to quarantine facilities, for example, Italy. The Writer must also mention that the impact on office space will vary from country to country depending on average lease periods and how long lockdown continues.
According to Northcourt’s Real Estate Market Outlook Report in 2020, the Nigeria hospitality sector recorded one of the highest performance rates in Africa in 2019. The sector now has more international hotel groups present or keenly looking to invest directly or via strategic partnerships, though still plagued with a number of bottlenecks such as prolonged development periods, the coupon rates at completion compensate for the troubles. The Writer is of the view that in Nigeria, where commercial activities drive the numbers of patronage in hospitality business in Lagos, Port Harcourt and Abuja, the lockdown will have made the profit projections of most hospitality businesses to drop drastically.
With respect to Nigerian residential markets, it is important to note that prior to COVID-19, the Writer envisages an increase in default in rent payments as all non-essential workforce are affected. As a suggestion, the way out is basically for Landlords and Tenants to agree on flexible payment plan as court eviction processes will be less attractive option owing to delays that will be experienced therein post COVID-19.
What is being said, in essence, is that there will be tenants that would not survive the pandemic, it is really a question of how many as some tenants will attempt to pause or suspend leases (office spaces), or agree on new commencement/termination dates with their landlords in some cases.
With regards to Investments, there may be an opportunity in real estate as they could perform over the long term and importantly, real estate will be regarded as a safe security along with bonds and treasury bills, making many indigenous and foreign investors to attempt to invest their funds into the sector as a result of perceived economic crisis that may make other investments in other sectors riskier or with lower ROI (Return on Investment) post COVID-19. This can be the reality if the government intervenes to make the sector very attractive to investors, failure of which will enable the unending discussion of providing affordable housing to start from scratch. The position of attractiveness of real estate remain uncertain as a possible recession can reduce value.
In shifting focus to real estate transactions and services, we can agree that force majeure clauses in various real estate transactions will be invoked and hopefully, a number of such transactions is salvaged. Aside the force majeure clauses, technology can also provide some oxygen to real estate transactions, as tech savvy real estate firms will continue to operate strongly in some aspects of the market during the lockdown and may leave them not completely bruised post pandemic since transactions may be shifted to virtual channels. Many brokerages had already begun working remotely and shifting their in-person approach to the digital world according to New York State Association of Realtors. The writer expects restructuring of organizations in the sector due to the inability to meet their obligations
Finally with respect to Facility and Property management services, which predominantly involves physical human interface in Nigeria, COVID-19 will enable many real estate firms think on how to provide these services vide technology. Even if all aspect of the services cannot be replaced with technology, the Writer believes that technology can drastically reduce the need for physical human interface in delivery of such services as there are software programs, application that are currently being used in developed countries to deliver facility management services.
The Writer joins the call of some real estate expert to regard facility management as essential services in the COVID-19 Regulations.
Omoniyi Onabule Esq.
Consultant and Expert in Property Law, Tax Law, Commercial Law and Criminal Trials
Phone no: +2348039270355, +2347050947585
P.O Box: 7954 Ikeja, Lagos, Nigeria.
[DOWNLOAD] Lawyer Develops App To Ease Real Estate Transactions