The Rising Energy Cost: Its Effects on the Real Estate Sector
ESV Hassan Sadauki Kibiya
Globally, the increasing energy cost is negatively impacting businesses, including the real estate sector. The escalating energy cost among businesses in the midst of the global rising inflation calls for concerns, as most businesses, the real estate sector inclusive, are finding it difficult to manage the rising energy budgets. In order to stay afloat and profitably remain in business, the cost incidence is being passed to the consumers of real estate products and services in the real estate ecosystem.
As at today in Nigeria, where all the macroeconomic indices are in the reds, real estate practitioners and other businesses are spending huge amounts on energy costs. Even exploring alternative energy sources like renewable energy does not come cheap. They cost good millions and not every business operator can afford it.
With the rising energy cost that is directly affecting real estate operators in Nigeria, especially property managers, who are managing large estates, and plazas, considering alternative energy sources becomes imperative. As a plaza manager, to power diesel generators cost a fortune and thereby escalating the cost of doing business as a real estate operator. A litre of diesel in Nigeria today goes beyond N800 and the prices keep gyrating for effective business planning and development. In most cases, depending on the part of the country where the real estate business is domiciled, availability of diesel is another cause for concern by real estate operators, and this has in many cases empowered the petroleum marketers to hike the diesel price far above the government prescribed prices.
The rising energy cost is seriously taking its toll on tenants who actually bear the cost incidence. Tenants in most service apartments cum plazas in major Nigerian cities like Lagos, Abuja, Port-Harcourt, Kano, and Kaduna. Most of them now pay higher service charges as accessioned by the economy and imposed by the property managers.
Energy will remain a vital part of cost components of businesses, including real estate. The energy sector drives other sectors of any economy, in changing the narrative of the energy sector in Nigeria, the government at all levels must invest heavily on a long term to address the energy crisis that has been bedevilling the Nigerian business environment. Immediate, efficient, and far-reaching energy policy that is devoid of corruption has the capacity of providing efficient energy for the Nigerian businesses.
Though it does not come cheap, exploring alternative energy sources is another good option to be considered by the real estate operators. In this regard, the government can champion this by creating a financial window aimed at ameliorating the energy crisis in the Nigerian business environment.
Interestingly, the United Nations (UN), the World Bank, African Development Bank (AfDB), and other multilateral organizations are all keen in their aggressive advocacy campaign for the use of alternative energy sources as a way of safeguarding the environment through the reduction of emissions from petroleum products being used by businesses across the globe. This is a call for sustainability that is at the centre of doing businesses in any economy today. Sustainable Development Goals (SDGs) number seven speaks directly to affordable and clean energy, while SDGs goal number 11 speaks to sustainable cities and communities. And with these two SDGs in place, is a clarion call for real estate operators to embrace alternative energy sources as one of the key operators in the global built environment.
In all, overhauling the Nigerian macroeconomic policies that will improve the ease of doing business in Nigeria is very key. With a very high inflationary pressure on businesses, fluctuating exchange rate, growing insecurity, and a political environment that is not clear-cut, the cost of doing businesses, including the real estate sector will continue to rise in an unimaginable manner. Addressing the aforementioned macroeconomic challenges will positively impact the entire value chain of the real estate space. This is a call for the in-coming government in Nigeria to immediately hit the ground running with the right and business friendly macroeconomic policies.
ESV Hassan Sadauki Kibiya, is a registered Estate Surveyor and Valuer. He sent in this piece from Kano, Nigeria.
