1004 Estate in Victoria Island, Lagos
With the reality of the COVID-19 pandemic dawning on the real estate sector, facility managers are facing a daunting task in offering their services to private and government estates.
One of such affected services, is facility management that attracts a mandatory payment of service charges by tenants toward the cost of maintenance and repairs of common facilities, beyond those being personally used by individual residents’ in their apartments.
The fee covers; car park or shared driveway, reception areas, corridors, lifts, grass cutting/gardening, general repairs and maintenance, Close Circuit Television (CCTV) equipment and block insurance among other things.
The Guardian gathered that the inflation rate, devalued currency and high exchange rate have impacted on the price of equipment, goods and services, which has made service charges to rise in major cities. In some other cities, managers have retained their rates.
Consequently, the high cost of goods has left facility managers in limbo as they contend with the market dynamics in attempt to manage their facilities.
The increase ranges between five – 12.5 per cent on imported items like consumables for equipment maintenance, equipment, replacement parts, building services components like pumps, some imported cleaning and washroom items, imported office hospitality items and others.
While in some locations, service charges are witnessing upward review, in others; the managers have maintained status quo or reviewed it downward to retain clientele.
The review comes in form of reduced services or increased service charge of between 10-15 per cent. Some would be effecting an increase from the next quarter or year-end in line with the existing contracts.
According to them, the review is necessary following the increase in the services as more people now stay in doors with attendant higher use of diesel powered electricity.
They said that the recent economic situation exacerbated by the coronavirus pandemic have made some arrangements in estate management unattainable.
For example, the cost of transportation, maintaining generators have gone so high because of the exchange rate.
Apart from essential services like security, many people are unable to pay for the charges leading to cut of services.
The offering also differs in commercial and residential apartments because of the increased use of generators,, security and pipe borne water.
In some cases, facility managers and residents have entered into arrangement to cut down on services and ensure transparency in managing funds.
For instance, in Lagos, the charge went up as high as N5 million per annum for residential occupants, depending on the location while for commercial property it goes between N10, 000 to N30, 000 per square metre.
Specifically, in residential flats at South-West Ikoyi, the occupiers pay as much as N2 million per annum, while clients pay N10, 000 deposit per square metre annually for commercial property within Anthony axis.
In ‘Banana Island estate’, Ikoyi, Lagos, which is one of the country’s most expensive neigbhourhood where dwellers are provided with world-class utilities, including underground electrical systems, an underground water supply network, a central sewage system and treatment plant, and street lighting and satellite telecommunications networks, service charges have remained stagnant despite the high cost of materials.
A resident told The Guardian that the service charge has remained even though there is likelihood of upward review in the next quarter.
The differential, he said, will be within 10-15 per cent. According to him, the levy varies according to the amenities in use but the minimum is N250, 000 per annum per apartment.
Furthermore, in ‘Osborne foreshore estate’, service charge fee covers; security, environmental services and waste management. The charge, which start from N500, 000 has remained static.
Alluding to that, former chairman, Lagos branch of Nigerian Estate Surveyors and Valuers (NIESV), Samuel Ukpong, said service charge is on the rise because of the inflation in the country.
According to him, when you get a commodity cheaper, the cost of transportation is high and the cost of labour has risen. Ukpong said, the utilities are failing because of the higher pressure on the infrastructure.
Similarly, indoor activities have risen in residentials, while on the commercial side; you still need to make the property functional, even if it is one person that is using the property.
Apart from essential services like security, many people are unable to pay theircharges due to the economic meltdown in the country, which has led reduction in services.
He cited a property in Anthony Village, Lagos, where generators that were normally switched on from 7.00pm are now being started by 9.00pm. The closing time for the offices was also adjusted from 7am to 5am.
Ukpong said the facilities would still need to be maintained because it is like the cost heads are constant, especially if you are going to use the lift as well as provide the generator and the cleaners.
He noted that the rise in charges is prompted by the inflation index, which was about 11. 5 per cent, now 2.6 per cent, increased the cost of managing estates to 20per cent.
“In other countries like US, they are making a bill for a grant, other countries are giving loans to their citizens either through grant or interest free loans”, he said.
Ukpong, who is managing properties in several parts of the country, also lamented that rising cost of labour going into the service charge in terms of administration.
For example, in one of such property in Anthony Village, Lagos, generators that were normally on from 7.00pm are not started till 9.00pm. The closing time was also adjusted from 7am to 5am.
Also, speaking on this development, former president of International Facility Management Association (IFMA), Nigerian chapter, Stephen Jagun said the cost of providing services is going up, but “we are working to bring comfort to residents at the minimum cost.”
For example, Jagun said some of the luxuries have been reduced because of the rising cost of materials.
He said the cost of importation is high due to the exchange rate. “We are aware that people are finding it difficult to pay. The best way is to meet with all stakeholders and resolve the problem for a win –win situation, because if you increase the charge, the non-compliance will be higher. This is what is happening in some of the properties in Ikoyi, Apapa and Surulere.
“For example, some commercial banks are still saying that since they do not work during the lock down they would not pay service charge even though we were providing service during that time”, he added.
Also, the Group Chief Executive Officer of Global Property and Facilities International Limited, Dr. MKO Balogun said, the price differentials vary per location and size of estates, as the same situation cannot be the same for Lagos; Port Harcourt Abuja; Kano and Osogbo.
He disclosed that practitioners are also recommending alternative items to clients, and bearing costs that cannot be passed to clients such staff salaries in the months lockdown, where clients don’t want to share in the cost or pay at all.