Nigeria
The commercial and residential markets face a resilience test amid various macroeconomic risks. Inflationary pressures from the removal of petrol subsidies and the floating of the Naira have introduced economic uncertainties. Elevated capital costs have ensued, with the residential, retail and office markets being marked by a slowdown in requirements.
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Subdued residential sector
In the luxury residential leasing market, a nuanced challenge has emerged, driven by the escalating impact of inflation on construction costs. To navigate this, build-to-rent developers are adapting their pricing strategies with a preference towards dollar-denominated rents. This shift is particularly pronounced among landlords servicing dollar-denominated loans and those procuring construction materials internationally. Ultimately, these costs are being transferred to tenants in the form of escalating rents. Currently, the average monthly rent for a 4-bedroom home in Lagos is c.US$ 5,000, an increase of 4.2 % since 2020.
Inflation impacting retail footfall
The continuous rise in inflation, which reached a 28-year high of 33.2% in March, has unsurprisingly lowered consumer spending while retail footfall has also declined.
Over the past 12 months, prominent retailers, such as the South African supermarket chains, Mr Price and Shoprite, have exited the market due to the increasingly challenging trading conditions.
Elsewhere, retail developers have turned their attention to neighbourhood mall developments, and/or the expansion of neighbourhood malls, where footfall remains resilient.
Tenant-Led Office Market
Mirroring other African nations, most businesses have made a full return to the office. Notably, the prime offices occupancy levels in Lagos and Abuja stand at over 80%.
Despite this return in demand, office rental growth across Nigeria is being tempered by an oversupply of office space, especially in Lagos. For instance, the completion of Centrepoint (Famfa Towers) and Trinity Towers, located in Ikoyi and Victoria Island, respectively, have together added 30,000 sqm of new office space to the Lagos office market. Consequently, tenants remain firmly in the driving seat when it comes to lease negotiations. Monthly prime office rents have held steady for the third quarter in a row at c.US$ 50 psm.
Increased demand for top-tier warehouses
The burgeoning demand for top-tier warehouses is discernible, notably driven by the escalating storage and distribution needs in key industrial nodes and specialised economic zones, such as the Lagos Free Trade Zone (LFTZ), which has seen increased infrastructure spending from both the public and private sectors.
The subdued supply of grade A warehousing is fuelling a premium for best-in-class space, with monthly lease rates reaching approximately US$ 6 psm, representing a 10% rise on 2020.