There are 24 reasons why we invest in real estate and they are not peculiar to any tribe or race. As long as you are a human being making real estate decisions, your reason will be found on this list.

It is a widely favoured belief that monetary reward is the only pay-off of real estate investment. But there is another kind of return, rarely talked about, which accounts for more than half of the reasons why you would consider investing in real estate.

This other kind of return often makes up for the down-times that characterize periods of negative or no financial returns even though it could sometimes be considered a hindrance to the effective delivery of monetary returns on your investment.

I refer to this other kind of return as Sentimental Value.

Sentimental value is defined as the value of an object deriving from personal or emotional associations rather than material worth. Hence, in real estate investment, you are either getting sentimental or monetary value; or both.

Sentimental value is also your inflated opinion of your piece of real estate’s value. The value of your real estate, in your opinion, can be related to a number of things peculiar to you as an individual. These could range from the sacrifice and discipline it cost you to acquire a piece of the earth or to set up a real estate business which is often known and considered by you alone.

This type of value tends to be subjective therefore, it finds its way around assets through the lifetime of the asset even as the asset moves from one buyer to the next buyer.

The creation story both from the religious or scientific perspective shows that there has to be a planet to sustain human life. It must have required some great effort to have the first house or bridge or wall. The earliest real estate objects have become artefacts in Museums or monuments around the world. These edifices have nostalgic stories behind them.

The labour invested in the acquisition of real estate often invokes an incredibly nostalgic feeling in the owner. It becomes a priceless asset, largely because of the underlying purpose of purchase, efforts and energy invested as well as the investment journey.

Most real estate investments come at higher financial costs than they should. The extra cost is usually overlooked because of the sentimental value attached to the real estate.

Conducting an objective evaluation of how much a real estate investment is truly worth at the prevailing rate may be impossible when the investment is induced by deep-rooted emotional motivations that are often denied or, in many cases, unknown.  This is considering the variations in the market value of properties within a location.

“Sentimental value tends to be subjective therefore, it finds its way around assets through the lifetime of the asset as the asset moves from one buyer to the next buyer”.

A skewed perception of real estate value makes it difficult to focus on a bigger picture or make accurate judgments about its monetary value given a current economic reality and real estate cycle which are always subject to external factors.

READ: Real Estate: A universal convertible survival tool

Of the 24 reasons for real estate investments, it is important that you identify which have influenced or can influence your real estate investment decisions as well as which of them may no longer be sentimentally or financially profitable.

Your reason may no longer guarantee any higher monetary compensation you may desire at a current or future sale. An attachment to the subtle sentimental value of a piece of real estate is partly responsible for many abandoned properties.

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The initial listing of an asset for liquidation at a rate way higher than the perceived market value only to change it later may suggest the existence of a defect to potential investors who are often smart enough to delay their investment decision in anticipation of a further drop in price. You definitely don’t want to deal at a loss.

It is best for every investor to put in perspective the kind of values an investment is expected to deliver and for how long that value will be profitable.

Explore Data on the Nairametrics Research Website

To access the 24 reasons, and tips on how to manage your reasons in the investment process, send “24 reasons” to 07062028677 via WhatsApp.

Despite the fact that out of the N3.26 trillion proposed Capital Expenditure for the 2021 budget, Works and Housing has the highest capital allocation of about 12.42%, which is N404.64 billion; Real Estate experts believe there are more hurdles ahead for property owners.  

They argued that the sector needs government intervention now, as it is struggling to survive the COVID-19 pandemic. 

READ: Landlords offer incentives to counter “work from home” induced vacancy rates

A Real estate practitioner and the Vice President, Lagos Chamber of Commerce and Industry (LCCI), Gbenga Ismail, expressed his displeasure over what he described as the government’s negligence and insensitivity to the sector.

During an interview on Channels TV, Ismail explained that the real estate sector has been taken for granted by everybody, including the government. He said, “Government does not realize what it has to do for the sector. When the government is offering bailout or supports for other sectors, it needs to consider areas where the building materials are coming from, like developers, interest rates, contractors who are going into these areas, because they would be affected. If they get affected by any of those variables that have been affected by the lockdown, they won’t be able to deliver. If you look at the stakeholders’ situation in the real estate value chain, from acquisition, construction, and all the areas connected, there must be a way for the government to intervene, especially taxes and levies, without necessarily having to put money in someone’s hands. But the things that add to the cost of the building must also be looked into.” 

READ: Real Estate Developers express fear over selection process of CBN’s N200 billion Housing Fund

A Real Estate Analyst, Martin Uche, is optimistic that the remote work policies by some corporate bodies, especially the multinational firms, will affect the Lagos A-Grade office market, not now but during the next round of renewals. 

According to him, the international corporates in the financial, technology, and management consulting sectors, who account for up to 70% of prime office tenants in Lagos, are increasingly adopting remote work options, and this will impact the Lagos A-Grade office market during the next round of renewals. 

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In one of his report, he said, “Though many offices are starting to open up, the enforcement of varying levels of lockdown as a result of the coronavirus forced corporates to temporarily close their offices in the first half of the year or introduce new work policies to sustain business operations during the period. In response, most companies allowed staff to work remotely during the lockdown period. Though working remotely was a means of keeping businesses running in the heat of the pandemic, it is clear that many international corporates will not be returning to the status quo. Instead, they are considering a number of options centered around downsizing the space they currently occupy, as many have realized that they can operate without the entire team in the same brick and mortar space.” 

READ: Scaling in Nigeria’s fashion industry is tough work – Ugo Monye 

We look forward to the changes that remote options will bring to the market during the next round of renewals. 

A Director at PricewaterhouseCoopers, Bola Adigun, had explained that the growth of real estate is dependent on the health of the economy and if the economy does well, the industry would do well.   

She said, “The private sector should look at ways by which they could partner with government to ensure that the nation has a sector that is profitable, bankable, and working. There are multiple areas by which the real estate operator could benefit from the budget.”

The adverse effect of the COVID-19 pandemic continues to take its toll on all sectors in Nigeria, including Aviation, Oil & Gas, and Entertainment amongst others and the Real Estate sector is not left out.

The changes made to the ‘8pm to 5pm’ white-collar jobs, due to the imposed lockdown as of April, 2020 has had a ripple effect on the sector. As the axiom goes, “When life throws lemons at you, make lemonades.” This exemplifies how corporate organizations in Nigeria have been able to turn the pandemic woes in their favour. In what seemed like a pipe dream about a year ago employers now grant access to their employees to work from home wherever possible.

READ: Is this Pandemic the death of coworking Spaces?

In one of the top Power distribution companies in Lagos, the staff rotate their ‘work from home’ initiative on a daily basis; such that when a staff resumes at the office today, they are scheduled to work from home the next day. In other notable cases, firms whose work description allows for it, the staff work from home permanently, unless when they have something imperative to do at the office premises.

This huge shift in the work structure has necessitated employers to rethink the need for their large rented office spaces, and many opting and negotiating for smaller office space, after their current rent expired.

READ: Experts state how COVID-19 affects Nigerian real estate sector

With a major shift as this, Property owners are bound to suffer some setbacks, especially at a time when economic hardship has made Nigerians penny-wise. They feel the weight and have been forced to brainstorm on possible solutions to keep their property generating money, or risk a large empty space of air for months and possibly years.

Nairametrics interviewed several Property Managers in Lagos, and some said it became non-negotiable for them to introduce attractive incentives, following incessant pleas by their tenants to reduce the rent, and in some cases have asked to share the office space with another tenant to reduce cost.

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Head, Administrative Department in an oil servicing firm around Norman Williams street Ikoyi, Lagos, John, explained that his firm had approached the property manager that it wanted to reduce the occupied spaces from three floors to a floor and half after the rent expired in July 2020.

He said, “We had to take the decision when it became obvious that we do not need that much space because more than half of our staff have been working from home since the lockdown. The truth is that they were more productive working from home than from the office. When we approached the property manager, initially he was delighted hoping to let out the space in no time. But when it dawned on him that more corporates were investing more in remote working or digital deliveries, he called back after two weeks, asking us to occupy two floors and reduce our tenancy period from 4 years to 2 years.”

READ: Bank’s Credit to Nigeria’s Real Estate sector hits 5-year low

In his own case, David, a property manager of one of the e-commerce pharmacies, told Nairametrics that the property owner, who he represents, also agreed to focus more on flexibility in leases and much shorter terms, especially as the pharmacy decided to shut two of its centres, as it introduced instant delivery service where orders could be placed via WhatsApp or phone calls during the lockdown.

He said, “The new normal in the real estate sector is that several corporate firms had realised they could achieve more either working from home or implementing innovations like instant delivery after orders were taken via social media tools.We had to consider flexible leases because it is better to get something from them than seeing vacant office spaces for months or years.”

READ: Working from home: Nigerian bankers share their experiences  

Post-COVID: Experts share expectations

Estate Intel, a real estate and construction information portal

In its recent report titled, ‘Nigeria’s Real Estate and COVID‘ it stated, “The future of work has always been remote, however, the COVID-19 pandemic has accelerated the pace at which traditional workplaces consider this option. Remote work options are expected to become a more standard requirement from employers, leading to lower space requirements and offices more focused on collaborative spaces. Many landlords have been incorporating attractive tenant incentives to remain competitive in recent years but we expect incentives moving forward to focus more on flexibility in leases in lieu of creative discounts.”

Suzanne Oluwole, Partner at Trillium Real Estate

“Occupiers and investors are adopting a maintain status quo stance where possible, whilst they wait and see. The full effects of the disruption caused by the pandemic still to come will transcend any shock wave the economy has ever faced before, and real estate is not immune. The trajectory of recovery we had been experiencing has been greatly affected and because this time it’s global, it may take some time to return to pre-COVID-19 levels.”

In all, it is expected that reduced usage due to the lockdown and pandemic will encourage occupiers to request concessions, while uncertainties will slow decision making.