The first half of 2022 saw a period of increased real estate market activity with the sector building on the 2021 economic growth momentum. The International Monetary Fund, noted that Nigeria’s economic recovery continued to strengthen against the backdrop of the agriculture and services sector with GDP growth reaching 3.6 percent (y/y) in Q1 2022.All sectors apart from the oil sector were on an upward trajectory with Estate Intel projecting that the real estate services and construction sector would grow by 5% to 10% in 2022.

This optimism has been seen mostly on the residential side where demand has outpaced supply within some precincts, as certain house types has witnessed a surge in demand within the Ikoyi, Victoria Island and Lekki corridors according to the MDS Research team, leading to a Seller’s Market. Land prices have also spiked within these areas, and property prices have remained on a steady rise in response to rising inflation as well as rising cost of building materials triggered by the fall in the value of the Naira in the FOREX market. This segment is expected to continue to witness strong growths for the remaining half of the year, and developers who create matching house types based on demand are expected to make the most returns.

On the Commercial/Office side, the market recorded a few bright spots with the lease of Kingstower by Microsoft being the most significant transaction within the period. However, despite the mild sparks, this segment continues to struggle with stagnant prices, over supply and demand slump which has crippled growth since the outbreak of the pandemic. This has resulted in a market shift from a Landlord’s Market to a Tenant’s Market.

We expect the overall sector will remain subdued with rising inflation and the subdued nature of the energy sector impacting on demand leading to a prolonged stagnation and even decline in rents of office properties across board.

On the Retail Side – While Lagos’ demographic profile bodes well for retail, the macroeconomic challenges have continued to weigh down on the sector. High USD Dollar rents, a shallow tenant pool, rising construction costs and diminishing disposable incomes have impacted on the retail sector demand in general. As such, apart from Ikeja City mall, occupancy levels remain weak in Lagos’ retail malls leaving little room for new projects to thrive. Market over supply is likely to result in a development slowdown in this segment.

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