Real Estate: Investors shift focus to 1, 2 bedroom apartments

Current rise in the demand for one and two bedroom apartments is dictating pace in Nigeria’s property market as investors redirect focus. DAYO AYEYEMI reports:

Rise in the demand for one and two bedroom apartments is already dictating the pace of residential development in Nigeria’s property market.

Unlike before, when real estate developers and home builders concentrated so much energy on the development of big apartments such as three, four and five bedrooms, investors have now shifted focus to the provision of one and two bedroom apartments, which have become hot cakes in the market.

Findings from the Nigerian Tribune showed that the preference for one and two bedroom apartments topped the list of property types in demand within Lagos, Abuja and Port Harcourt.

Also, in the latest studies by MDS Properties Limited on  the Victoria Island’s  property market, the group analysed a sample pool of 428 apartments and of this number, over 369 units have been sold.

Further analysis of the units sold, according to the company, revealed that they comprised 38 per cent of  one bedroom apartments, 43 per cent of  two bedroom apartments and 19 per cent of three bedroom apartments.

Subsequently, in 10 top tier real estate developers and brokers interviewed within the precincts, the group said it was able to identify six major reasons why there was a significant uptick in demand for one and two bedrooms within the area.

On why there is huge demand for one and two bedroom apartments, analysts from the MDS properties limited  explained that corporate entities are now  looking more at accommodating their expatriates in short stay homes where they could pay weekly/monthly/quarterly as opposed to yearly which they did before.

“This has reduced the demand of yearly rentals by these companies by 40 per cent -45 per cent and in turn shifted the focus of investors to one & two bedroom apartments for Short-let/Short stay apartments, Air bnb and more,” the analysts said.

Besides, they pointed out that owner-occupiers looking for an accommodation in the Central Business District (CBD) and older couples were downsising to more efficient spaces.

In addition, they explained that parents are now giving their children these apartments, while one and two bedroom apartments served as starting out for young families, apart from the steady rise in the number of first-time home buyers who preferred relatively more affordable apartments.

It was also gathered by the Nigerian Tribune that due to high rental values coupled with decline in purchasing power, new tenants and accommodation seekers preferred small houses to big apartments.

Conversion

Due to the rush, a lot of landlords are currently converting their ‘big’ houses to one and two bedroom room apartments for immediate occupation.

In the high-brow areas of Lagos and Abuja, investors and real estate developers have suddenly discovered huge demand for studio apartments, one bedroom and two bedroom apartments for first-time accommodation seekers and upcoming couples.

For tenants, it was discovered that the desire to cut costs and save money to meet other needs was a major factor driving demand for small apartments.

Landlords’ views

Speaking with Nigerian Tribune, Bade Jonathan, a landlord in Ajah, Lagos, said he could not get tenants until he converted his two units of three bedrooms to four units of one bedroom apartment each.

Instead of the targeted N1.5 million annual rent from the three bedrooms, he said he was able to rake in N2 million as rent from the units of one bedroom apartments

According to him, the three bedrooms had been emptied for almost two years without tenants before the conversion.

Another landlord, Mr Moses Irechukwu, said that rental v+alues for  one bedroom apartments in Omole Phase I and II, Magodo, Maryland, Ogba, Ikeja, OPIC and Arepo in Ogun State now cost between N300,000 and N1million.

A home seeker in Lekki, said that small apartments have become hot cakes in the environs as young couples, whose workplaces are in Victoria Island and Ikoyi jostled for few available accommodation.

He pointed out that huge demand for studio apartments, one bedroom and two bedroom flats in the property market against low supply of the products was responsible for the rush.

Report

In his report  on ‘Real Estate Outlook, which was released early in the year,  Managing Director, Northcourt Real Estate Limited, Mr Tayo Odunsi confirmed that studio apartments, one bedroom and two bedroom flats neared city centres have continued to enjoy demand and that there had been  a shift by some developers in favour of these categories of apartments.

He pointed out that the rising demand for short let apartments would lead to more conversions, giving developers one more reason to shift focus from bigger houses to studio apartments.

“This would have the dual benefit of meeting the existing demand while maintaining cash flow for developers,” Odunsi said.

Experts’ view

Lagos based estate surveyor, valuer and facilities management practitioner, Mr Stephen Jagun, said  that people have been cutting down on excessive space they occupied either as new tenants or old one, hence, the need for supply to follow the trend.”

He noted that there were instances where people leased a room where they stayed during the work week days and traveled to meet their families on weekends.

“So if smaller accommodation is available directly in the market, they’ll take it; because the fellow you are paying rent to may not pay his own rent or the owner frowning at sub-letting,” he said.

According to Jagun, starters did not need all the luxuries, hence their preference for one bedroom and two bedroom apartments

Jagun added that expatriates, who are on short stay, also preferred studio apartments for their privacy and business.

This choice of apartment, the facility management expert said has provided another vista of opportunity for real estate developers.

An estate surveying practitioner and Director in one of the offices of the Lagos State Government, Mr Kunle Awolaja, attributed the shrinking economy as the main factor coupled with citizens’ low purchasing power.

The trend for smaller apartments, Awolaja said, might not necessarily reduce rent on the types in focus but would produce shifts in accommodation types required as tenants would move from detached houses to smaller apartments.

Despite this, he said the shift in accommodation would not reduce nor solve accommodation problems as demand would increase for the smaller apartments “which will result in the bigger apartments being redesigned and remodeled to the lower ones.”

Another estate surveyor and valuer, Mr Lekan Akinwunmi, explained that conversion of big apartments to smaller ones was to meet the needs of people, adding that demand was the driving factor.

According to him, rental values of these accommodations could not be reduced due to limited supply and inflation on building materials.

Besides, he said “People also want to maximise space; so space management comes in. He is of the opinion that the trend would reduce accommodation problems.