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Glut in Real Estate Presents Investment Opportunities




CLUTTONS, a firm of international real estate consultants, has noted that there is an overall slowdown of activities in Lagos’ commercial real estate market, with rents either stagnating or declining across most segments of the sector. Cluttons’ Spring 2016 Lagos Commercial Property Market Outlook report attributed the weakness to the adverse global and domestic economic environment, which is fueling and challenging trading conditions.

According to Faisal Durrani, Head of Research and Partner at Cluttons, “the decline in crude oil revenue has taken its toll on all business segments, mirroring what we have seen in other parts of the world. Perhaps, most significant, however, has been the devaluation of the Naira, which is supporting the high levels of inflation. In addition, the restrictions around foreign currency exchange in Nigeria have put international businesses under tremendous pressure as they struggle to cope with the inability to make payments.

“Furthermore, the deteriorating global economic conditions have also impacted Lagos’ commercial real estate market, with transaction levels dipping and vacancy rates rising across the board, putting rents under downward pressure and driving landlords towards offering a range of lease incentives to entice demand.”

The Chief Executive Officer of Cluttons Nigeria, Erejuwa Gbadebo, said the most expensive office sub-market at the end of first quarter was Ikoyi at the rate of $850 per square metre, followed by Victoria Island at the rate of $750 per square metre.

He added that while there has been limited movement in office rents over the past six to nine months, Victoria Island is among the three worst performing markets in the 12 months to the end of March 2016, with rents falling by 13 per cent to $750 per square metre, while Q1 2016 recorded no change in rents in all seven of the firm’s sub-markets.

According to him, “Cluttons expects more significant falls this year, reflecting the shrinking level of overall occupier activity. In fact, on an annualised basis, rents in Ikoyi have already declined by seven per cent in the last 12 months to $850 per square metre, while Lagos Island has registered a substantial 25 per cent reduction in asking rates over the same period ($113 psm).

“This is largely due to the strong pipeline of office supply. In fact, Cluttons expects that some 35,000 square metres of space will be added in Ikoyi and the VI, led by the completion of The Wings and Madina Tower,” Gbadebo noted.

He said there are challenges ahead for the market, but there are clear opportunities for landlords to position themselves favourably.

Based on the firm’s experience in other similar international markets, a well maintained and well managed properties will always be in high demand and it is the landlords that demonstrate an understanding of market conditions by offering flexible payment terms and other lease incentives that will be best placed when demand does pick up again.

“Cluttons’ report explains that rents in the retail sector appear to have held steady, despite the economic conditions and tough operating environment. Many retailers have committed to existing leases with built in escalations, hence no real change in rents will be immediately evident in the city’s key shopping malls.

“Having said that, we are aware of instances where landlords have reduced rates to help retailers stay profitable in the tough trading environment. For lease renewals in existing malls and the new malls coming up, however, it is likely to be quite a different story. We expect to see some falls in rents this year, reflecting the tough operating conditions for retailers.”

Cluttons also identified a growing trend in the retail sector with an increase in provision of smaller formal retail centres with gross leasable areas of 5,000 square metres or less.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal



gold bars - Investors King

Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.

Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.

While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.

“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.

“Gold remains an yield story and that yield story is very much tied back to the tapering story.”

A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.

“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.

A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.

Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.

Silver rose 0.9% to $22.61 per ounce.

Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.

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Crude Oil

Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints



Brent crude oil - Investors King

Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.

Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.

“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.

Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.

Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.

China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.

India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.

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Crude Oil

Oil Holds Near Highest Since 2018 With Global Markets Tightening



Crude Oil - Investors King

Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.

Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.

China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.

Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.

“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.

At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.

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