Vacancy Rate Still High at 42% in Upper End Lagos Neighbourhood

Property vacancy rate is still high in highbrow neighbourhoods of Lagos, averaging 42 percent, data seen by BusinessDay has shown. The development is in consonance with analysts’ prediction for 2012.

Demand has been quite low for high end properties which were hitherto the toast of banks, telecom companies and international oil corporations, which analysts say are also responding to the state of the economy.

A good number of houses worth billions of naira, particularly in Ikoyi and Victoria Island, are unoccupied, despite the influx of people from various parts of the country into Lagos.

According to a survey on property vacancy factor conducted by Financial Derivatives Company (FDC) average vacancy rate in Lagos is 42 percent, with vacancy rate in highbrow areas standing between 40-45 percent while in the mainland area, it stands at between 10 and 15 percent.

Bismarck Rewane, FDC’s CEO, explains that the vacancy rate is more pronounced in the residential than in the commercial segment of the property market, stressing that the high vacancy rate recorded in the residential segment in Lagos is also more pronounced in highbrow residential areas of the state.

“On average, the residential vacancy factor is about 20 percent, compared to the commercial average vacancy factor of just 9 percent. This represents a variance of 11 percent in terms of increase”, he said, adding that the 454 houses considered in 11 streets in Victoria Island and Ikoyi axis, showed that all the houses had an average vacancy factor of 10.08 percent.

The FDC boss attributed the high vacancy rate in Victoria Island and Ikoyi to increased supply on the Lekki and Ajah corridor, which provides ready alternatives in terms of affordability.

BusinessDay investigation also reveals that most of the vacant luxury houses considered by the FDC survey on Karimu Kotun Street, Kofo Abayomi Cresent, Glover Road, Cameron Road, and others, attract asking prices that are beyond the reach of average Nigerians. This has led to the migration of many residents and companies from these high brow areas to the mainland. This migration has in turn led to increase in house rents in the mainland areas of the state. It was also found that many residential houses were being converted to commercial use.

Rewane also observed that development and investment in the residential segment of the market was still low, and that aggregate demand was well below the capacity of, and supply by developers.

He said “delinquency and default rates by tenants were still below 25 percent in the Lekki and Victoria Island neighbourhoods”.

Rewane noted further that vacancy rate was low in such middle class settlements as Surulere, Illupeju and Ikeja, among others.“Economic contraction is yet to affect the middle-end market”, he added, pointing out that Lekki was the fastest growing market in the Lagos metropolis.

Culled from businessdayonline.com