Residential Houses and Office Spaces – Which is More Sought After.

INTRODUCTION

Buildings serve different purposes and some of them are – residential, commercial, and recreational purposes among others. People need shelter as well as office spaces but the question is which of these buildings is more preferred to be acquired.

Office spaces are as important as residential buildings because people need conducive environments to carry out their daily official activities . The cost of acquiring and maintaining an office is quite high because one has to put into consideration cost of alternate power supply (generator and fuelling), facility management services amongst others. These places represent business districts in Lagos state.

Residential buildings could be built to be owned or put up for let. The duration of rent may range between 1 to 5 years. Residential buildings on the other hand are charged based on the number of rooms in the building, the amenities to be enjoyed and other services provided. Residential buildings are readily put up in area like Magodo, Lekki, amongst others.  Factors considered in acquiring a residential building include availability of good road network, power supply and availability of portable water.

However, the demand for both of them varies and is dependent on various factors which include location, charge rate and many more.

CASE STUDIES

We would be considering Victoria Island and Ikeja as our case studies for the purpose of this article.

Victoria Island is an affluent area that is encompassed by water. It is bordered on the south by the Atlantic ocean, on the West by the Lagos Lagoon, on the east by swamps which have been sand filled to create an extension (Maroko/Oniru Estate) and on the north by the Five Cowrie Creek. Victoria Island is the main business and financial centre of Lagos state as a number of companies have their Head Offices there. It is also one of the most exclusive and expensive residential areas in Lagos.  So many embassies as well a number of Consulates are located on Victoria Island.

However, the cost of owning an office space is high and is dependent on some factors which include:

  • High land cost: The cost of land on Victoria Island is relatively high. The average cost of a plot of land is about N150, 000,000. The cost of renting or buying an apartment or office space would definitely be high.
  • Cost of imported construction materials:  To ensure that standard construction is carried out, most construction materials are imported. However, the costs of these materials are high and would result in the high cost of construction. We also have to engage skilled personnel to carry out the work.
  • High interest rates: To carry out some of these constructions, there might be a need to acquire bank loans to finance and finish the project within the stipulated time. However, the interest rates on the loans are quite high and one has to put it into consideration.
  • Inadequate supply of suitable development sites: There is a shortage in supply of land on the island; this however would make the few available ones to be quite expensive. It also contributes to the high cost of construction as high rise buildings are to be put up to create more space.
  • Unreliable power supply: Nigeria’s power supply is unreliable and one must acquire a power generating set to ensure the smooth running of daily activities in the office. This makes up service charges and can be as high as about 50% of the annual rental charges.

The table below shows the cost of rent of a residential building, an office space as well as the sale of a residential building in Victoria Island.

S/N RESIDENTIAL FOR RENT RESIDENTIAL FOR SALE OFFICE SPACE FOR RENT
1 3 Bedroom flat 4 million naira 5 Bedroom detached house 250 million naira N45,000/M2
2 2 Bedroom flat 3 million naira 3 bedroom flat 80 million naira N135,000/M2
3 5 Bedroom detached house 15 million naira

 

Ikeja is the state capital of Lagos state. It serves as both residential and commercial area within the state. The Federal Airport Authority of Nigeria has its headquarters in Ikeja, as well as one of Nigeria’s International Airport – Murtala Mohammed Airport. Also, various airlines have their head offices in Ikeja. We also have the Government Reservation Area (GRA) which is supposed to serve as residence but is also fast becoming a commercial area as various offices are being set up within the G.R.A.

The average cost of land in Ikeja is about 100 million naira. In constructing any building, one would definitely make use of quality materials and skilled personnel. However, more office spaces are being considered than residential buildings. Ikeja has a considerable area of land.

S/N Residential for rent Residential for sale Office space
1 3 bedroom flat 2.5 million naira 5 Bedroom detached house 250 million naira N25,000/m2
2 2 bedroom flat 1 million naira 4 bedroom duplex 150 million naira N50,000/m2
3 5 bedroom duplex 12 million naira

CONCLUSION

The demand for residential buildings is based on various factors like

  • The location of the property.
  • The cost of rent per annum.
  • The purchasing power of the client.
  • The taste of the client.
  • The type of property.
  • Tourism.
  • Population.

On the other hand, the demand for office spaces cannot be determined using the same parameters. There are various types of companies and they would need different types of office space. A large scale office an afford to rent office space in Victoria Island while a small scale or medium scale company can afford the office spaces in Ikeja. An upcoming entrepreneur would rather work from home or take up a virtual office if there is a need for professionalism.

However, a common factor to the demand of both properties is the price of the property. Most properties (both residential and office spaces) are quite expensive irrespective of the area which has led to an increase in the number of unoccupied buildings across the country.