How is the real estate market doing?
Prime land prices have generally retained their value in Naira terms through the challenging 2015-2016 economic cycle albeit with a considerable fall in pricing in Dollar terms and an increase in the supply of prime locations up for sale suitable for commercial development particularly in Victoria Island and Ikoyi.
Demand is such that even in the downturn, buyers are prepared to purchase property where they feel that they are getting value for money. Developers that are able to offer good quality residential units in attractively located estates that tick the boxes for buyers will still sell out.
The retail sector has been hit by a triple whammy of reduced consumer spending, a falling Naira leading to inflationary pressures on imported consumer goods and supply constraints in sourcing foreign exchange to buy the goods to stock shelves. This has negatively impacted retailer’s turnover with a knock-on effect on their ability to pay rents.
The commercial office market continues to suffer from a supply overhang initially due to a strong development pipeline but now aggravated by a fall away of corporate demand due the constrained economic environment. The upshot of this is the weakening of rents and the increasing prevalence of sweeteners to attract new tenants to fill space
A challenged hospitality sector will continue to track the performance of the wider economy. It will however be a major beneficiary of any pick-up in economic activity particularly on the back of stable or rising oil prices.
International investors remain reluctant to invest in Nigeria as a lack of convergence between the official and parallel market rates, continues to draw attention to the lack of liquidity and currency risk inherent in the foreign exchange market.
1. Land value data is derived from advertised sales prices
2. Eko Atlantic prices originally quoted in US$ are blended waterfront and non-waterfront prices
3. Official USD/NGN rates are used to convert Naira to dollar values
MCO Real Estate is a Lagos, Nigeria based real estate investment and advisory firm with a focus on providing investment & transaction advisory services to local and international clients seeking to invest in or develop large scale real estate opportunities across Nigeria. 5th Floor Mulliner Towers, 39 Alfred Rewane Road, Ikoyi, Lagos, Nigeria
Tel: +234(0)806 924 5688.