Nigeria: Why Ikoyi Apartments Are Empty – Developer

If you think the reason for the visible empty residential apartments that cut across the length and breadth of Ikoyi, a highbrow neighbourhood and one of the most expensive residential abodes in Lagos, is due to effect of the current economic crunch in the country, it is not.

Rather, the cause of the emptiness is as a result of poor finishing of the apartments coupled with the use of poor materials during construction.

Making this revelation to Vanguard Homes & Property, the Managing Director, Sujimoto Construction Limited, a Lagos-based real estate development company reputed for high class property development, Mr. Sujibomi Ogundele, said: “You cannot offer a Toyota for the price of a Bentley.

One might argue that both cars will eventually ply the same road. But the efficiency and prestige of a Bentley speaks for itself. Any sane person knows that. While many will consider this outrageous, it is indeed a stark reminder of the realities experienced in Nigeria’s real estate industry today.

“If you are an avid property enthusiast, developer or an observer, you must have noticed the surge in the number of empty apartments in Ikoyi over the last few years. This disturbing phenomenon must have prompted the well-informed and educative research publication of economy watch, Financial Derivatives Company Limited, to point out that the number of vacant property in the upper class real estate neighbourhoods of Lekki, Victoria Island and Ikoyi has risen by 72 per cent over the last 18 months.”

Ogundele who noted that he was at a meeting with the MD/CEO of Financial Derivatives Company Limited, Mr. Bismarck Rewane, for the first time, said their conversation touched on the matter of surge in the number of empty apartments in Ikoyi, pointing out that the padded cost of construction is responsible for outrageous prices of apartments in Ikoyi.

According to him, to avoid drawing hasty conclusions and to guide our investment choices, investors should only listen to industry experts and verifiable perspectives as seen in the FDC research, and avoid the bandwagon of those listening to jaundiced opinions.

Sujimoto Construction boss who stated that apartments that should not cost more than N100 million, are costing investors N400 million to construct, arguing that owners of such property have no choice but to let out an apartment at N40 million, thereby transferring the padded cost of construction to tenants.

“What is the difference between locally fried plantain chips sold in remote areas and its equivalent sold in urban areas? Have you ever wondered why a good meal prepared in Ijebu Ode would cost less than one sold in Lagos?

“An estimated rent for an apartment in Ikoyi is about $80,000. The same apartment in Lekki would cost $30,000. What do you think makes the difference? It is value arising from quality and location put together. If location is a fundamental principle in real estate, how much more luxury real estate? A developer who compromises on the quality of materials, has no right to place an exorbitant price on his products (apartments).

“Thus, the argument for supply exceeding demand, as far as empty apartments in Ikoyi go, is unfounded. Luxury apartments are in high demand. Poorly finished buildings with exorbitant prices constitute the pile of empty apartments constantly being referred to in Ikoyi. Consider this: Are developments such as Tango Towers and Ultimate Towers in Ikoyi, empty?

“If such developments are not empty, imagine what would happen when the Lorenzo by Sujimoto with its high-end features such as state-of-the-art facilities, exceptional returns on investment and competitive pricing, is completed?

“During my interview on CNBC Africa, I pointed out that luxury is not expensive, but it is the intention to deliver luxury that is expensive. While the cost of a nice three-bedroom apartment in Johannesburg would go for about $350,000, the same apartment in Ikoyi would cost one million US dollars. If the cost of construction materials is the same all over the world, the price of marble, granite, cement, tiles, kitchen, doors, paints etc, why is cost in Nigeria about 300 per cent higher?

“With the plummet of oil price and downward trend of major economies across the world, individuals and organisations no longer have loose money to throw around. And with the current downsizing by companies, prospective tenants demand full value for their hard-earned money.

“Nigerian developers must realise that times have changed. The ‘quick fix, quick gain’ syndrome has ended. Real estate developers who fail to understand that the current investors and real estate enthusiasts are upbeat about quality and finishing after having seen same from their travels around the world, will soon fade away,” Ogundele said.