Far too often, Nigeria’s city of Lagos is perceived by many people to be densely populated, notorious for traffic jams on the roads and rapid urbanisation.
But I took a different approach. Having never been to Nigeria, I made a conscious decision to not form any presumptions coming into the country and accept it for what it is. And there is no doubt that I was confronted with a country that is different from other parts of the world when it comes to its people, culture and language.
The inaugural West Africa Global Real Estate Institutes (GRI) Conference – a sought after event in the continent’s real estate calendar – brought me to Africa’s largest economy in February.
Although I have done work for international clients over the past six years in JLL’s Amsterdam transaction management and strategic consulting business – it’s one thing to be told about a country and another when you visit and speak to key real estate stakeholders on the ground.
Among many observations about Lagos, I was mostly impressed by the growing maturity of the city’s real estate market. Already there are decent commercial buildings available in the market, but it seems like developers continue to pour millions in bringing new properties into the market – signalling a construction boom that is in full swing.
One of Nigeria’s big ticket real estate project, which I had the opportunity to tour while attending GRI, was the Eko-Atlantic development site. The master plan of the project is to build one of the worlds’ most advanced new mega cities in Lagos, covering 10 million sqm of residential and commercial space. This is an ambitious project that a lot of Nigerian’s are anticipating, as this will be a game-changer and put an international spotlight on Lagos.
Other development activities taking place in Lagos are in the retail, residential and commercial space. With a population in excess of 180 million and expected to grow to over 220 million in 2020, there will be a similar growth in demand for residential property in Nigeria.
The banking sector is also a large player on the market, focussing on portfolio rationalisation and footprint optimisation. This is a sector that will have a big impact on the real estate market and one that could have a positive spin-off for the demand of new and high quality office space.
Two trends have emerged when it comes to developments in Lagos, largely the supply of new prime Grade A or B office space coming to market; and secondary tenants that have occupied smaller offices and are now demanding new and quality space. This movement of secondary tenants fuels redevelopment opportunities as well as attracting new tenants.
The main topic to have emerged out of GRI is the looming threat of Nigeria’s ailing economy which is expected to undermine the country’s growth prospects. Nigeria is heavily exposed to the oil and gas sector, and with the oil price dropping to 12-year lows, the country’s economy will likely be further impacted.
The oil price rout is expected to impact the government’s revenue, as oil accounts for approximately 90% of the state’s revenue. Adding further pressures to the economy is the devaluation of Nigeria’s currency, the Naira against the US Dollar.
As the economic crisis deepens, already questions are emerging about how this will affect the real estate market, specifically the implications for tenants’ demand for (new) space and landlords holding on to their existing tenants and attracting new tenants. There are concerns that real estate developments (that are currently underway) in Nigeria might stop due to the country’s economic challenges.
It’s probably going to take a long time before Nigeria’s economy settles, but the real estate market cannot wait for the economy to find its full equilibrium.
Real estate developers who have deep pockets can afford to sit out the economic slump. Whereas developers bankrolled through bank loans or private equity capital might face the urgency of delivering projects on time and finding occupiers to take up the spaces.
For landlords, they will need to find creative solutions such as offering lease flexibility and other financial benefits to attract new tenants and keep their buildings occupied.
Despite the noise about the country’s economy, my key takeaway from my short time in Nigeria is that the country is a very proud nation when it comes to its achievements. Nigeria is also an emerging market offering a lot of real estate opportunities.
As I will be officially joining JLL’s Sub-Saharan Africa team in March, I will be closely watching how the rest of the continent’s real estate market will unfold.
Lagos has given me a first glimpse of what is truly a fascinating city with a warm culture of people – I recommend anyone to go see and explore Nigeria!