BusinessDay 03 Apr 2018

Tuesday 03 April 2018
C002D5556
BUSINESS DAY
29
In association with
Rising manufacturing PMI signposts
opportunities for investors in industrial space
CHUKA UROKO
The rise in the
manufacturing
sector’s purchasing
managers index
(PMI) to 56.7
percent in March, up from
53.3 percent in February
2018, sends strong signal to
investors that opportunities
exist in industrial space
supply as manufacturers are
expanding production and
needing more factories and
warehouses.
Nigeria’s PMI is an indicator
of the economic health
of the manufacturing sector
based on new orders,
inventory levels, production,
supplier deliveries and
employment. In the last 2
to 3 quarters, the PMI has
shown a steady and rising
trend. In the last 12 months,
it has risen by almost 10 basis
points from 47.7 percent in
March 2017 to 56.7 percent
in March 2018
This may not be surprising
as, according to Tayo
Odunsi, CEO, Northcourt
Real Estate, as manufacturing
has enjoyed significant
private and government
intervention and patronage
since the decision by
the federal government to
diversify from being a monoeconomy
was reached at the
turn of the recession.
Northcourt in a 2018 real
estate outlook notes that with
international firms preferring
to build their own factories
and warehousing to
specification, the demand
for commercially available
industrial space remained
mostly from local firms,
adding that more demand
is expected over the next
12 – 18 months as industrial
space requests was high in
Q4 2017 due to increased
economic activity occasioned
by relatively easier
access to foreign exchange.
“Demand for consumer
goods is also growing as
purchasing power improves.
The recovery of oil prices
and the consequent growth
in demand for allied services
has also fuelled the need for
warehouse space”, Odunsi
posited, adding, “Ikeja with
its access to major nodes
in Lagos currently ranks
the most active market for
industrial space as areas
originally used for manufacturing
are being converted
to warehousing use”.
For investors wishing to
push money to this segment
of the real estate market, the
next most demanded area
for space is the Isolo Industrial
area where mostly
smaller spaces are leased.
Private firms with many
employees are increasingly
converting warehouses to
office use to avoid the cost
of conventional office space.
Some investors are already
taking position as a
consortium of industrialists
has so far made investments
in excess of $150 million
towards the development
of four factories in the Lekki
free trade zone. These
include TG Arla, Palm Oil
Refinery, Kellogg’s and Insignia
Technology Prints.
Odunsi recalls that Kellogg’s
10,000 metric tons per
year cereal factory was commissioned
on December
1, 2017. AB InBev outlined
plans for a new brewery
to cost an estimated $250
million, its largest portfolio
investment outside South
Africa and also plans to
list on the Nigerian Stock
Exchange.
Though this segment is
struggling at the moment,
close market watchers see
hope in the immediate
to the short term. But not
without threats which the
International Real Estate
Partners (IREP) in its recent
report listed as foreign
exchange, import policies,
poor electricity supply and
inadequate transportation.
In spite these, the report
anticipates that as more
facilities seek alternatives
to help improve production,
this in turn should boost
the demand and supply of
warehouse rentals which,
denominated in Naira per
square foot, have remained
stable.
Erjeuwa Gbadebo, the
company’s CEO, added,
“as the retail and industrial
markets are closely linked,
we expect that the anticipated
growth in retail will cause
a corresponding increase in
industrial real estate”.
Infrastructure is a major
growth driver and the improvement
in the manufacturing
sector was boosted
significantly by the improvement
in infrastructure
development at both state
and federal government
levels.
2017 saw the revitalization,
commencement and
continuation of a few infrastructure
projects. Odunsi
pointed out that many of
these projects are critical
not only to opening up new
real estate hot spots, but
also driving key economic
investments in the country
as a whole.
The Federal Government
partnered with the Nigeria
Liquefied Natural Gas
(NLNG) and Julius Berger
to resume works on the
34km Bonny – Bodo road
construction. The ₦120.6
billion project would be
a landmark achievement
seeing that it had been in
the coolers for about 40
years. Both parties would
be sharing the construction
costs 50-50.
Lagos state completed
the Ajah and the Abule-
Egba bridges in less than
two years. At 620 metres and
1.3 kilometres long respectively,
both projects were
partly funded by a ₦85.1billion
series 2 bond issuance.
The 1,100 kilometre
Standard Gauge Rail
(SGR) will go a long way
in increasing the current
national capacity of 15,000
metric tonnes per year. The
Federal Government again
signed up the China Civil
Engineering Construction
Company (CCECC () to build
the four-dam, $5.79 billion
Mambilla hydroelectric
power project expected to
take 72 months to complete.
Other pipeline infrastructure
projects expected
to have far reaching impact
on the economy and standard
of living include the 35
kilometre Apapa-Oshodi Expressway
reconstruction and
the Lagos-Ibadan standard
rail project.
Infrastructure
Maintenance
With
TUNDE OBILEYE
Weather conditions as
consideration in FM
The weather condition
of an area generally has
direct effect on activities
as well as human behavior
and most times, finance.
Taking into account the
climate means careful planning
is inevitable if facilities
managers are to ensure their
tasks are well executed with
little or no hitches. We cannot
change the weather but
we can control what we do
and that’s when good planning
comes into play.
Facilities managers are
responsible for ensuring
that facilities under their
care are in a good state at all
times regardless of changes
in their circumstances, the
economy, or weather.
As the planet warms, other
forms of extreme weather,
including heat waves, heavy
downpours, and floods, are
also expected to increase in
frequency and intensity.
Extreme weather can cost
facilities managers a hefty
sum. In the US, Hurricane
Sandy alone inflicted $33
billion in property damage.
As a result, property managers
and building owners are
waking up, having realized
that factoring climate change
mitigation and adaptation
into new construction and
renovation projects is no
longer “nice to have,” but an
operational imperative.
When taking up a facility,
the weather changes
associated with that location
should be considered.
For instance, we have two
main climate seasons in
Nigeria—dry season and wet
season—and the harmattan
period which forms part of
the dry season, accompanied
by heavy form of dust
and extreme dryness. Not
planning well enough can
lead to avoidable extra cost
and hassles between clients
and facilities managers.
The dry season is usually
associated with heat,
low rainfall and sometimes
extreme dust. Things to consider
are:
1. Ensure the air conditioning
systems are fully
serviced- this happens to be
one of the most important as
people tend to need a cooler
environment to survive this
season
2.Ensure the cleaning
personnel are on point with
their cleaning task; that
every spot is wiped in the
morning and before close of
the day. Accumulated dust is
worse to take off.
3.Ensure plumbing systems
are checked in readiness
for the rainy season.
4.Roofs should also be
checked for holes to avoid
water leakages during the
wet season.
5. Paint work and renovation
can be done. It is easier
to carry out renovations during
the dry season as there is
no form of disruption.
The raining season is usually
associated with heavy
rainfall, cold, mud and at
extreme times, flood. Things
to consider are:
1. Purchase of more
cleaning products due to
the rain and the mess it can
cause. People get to bring in
their muddy shoes into the
building leading to dirty foot
marks on the flooring. The
cleaning team will likely use
more floor cleaning products
at times; and the cost
should have been factored
into the budget.
2.Unclog gutters: Flooding
is a high risk associated
with the rainy season and
this is usually fostered by
lack of a proper drainage
system or clogged gutters.
Before the rain season starts
with full force, inspect the
gutters to make sure they
can drain properly and that
they do not cause water to
back up. Also ensure they are
constantly cleaned.
3.Fumigation: This is really
important as insects
including mosquitoes breed
well during this season.
Obileye is a UK-trained lawyer and CEO,
Great Heights Property and Facilities
Management Limited
Email:
Tundeobileye@greatheightslimited.com