Lagos market as allure for Nigeria’s real estate investors

The Lagos real estate market is the most vibrant of all the real estate markets in Nigeria, followed by Abuja, Port Harcourt and Abeokuta/Sagamu markets in that order. In Africa real estate market, Lagos market comes third. Nairobi – a technology and expatriate hub, and Cape Town – a prime residential, office and hospitality market, led in all the real estate indices in Africa in 2024. Real estate is real property consisting of land and the structures over land like buildings, along with its natural resources such as plants (e.g. orchards, timber plantations etc), minerals or water, and wild animals in a reserve; immovable property of this nature; an interest vested in this is also an item of real property. Real estate is more referred to as land, buildings or housing in general. Nigeria has 923,768 square kilometres of real estate. The value generated from this land mass or real estate depends on how it is planned, developed and managed to improve its quality.

Ibom Towers, an 18-storey building sitting on 2,191.22 square metres of land in Victoria Island, Lagos State, is being developed by Akwa Ibom State Government through the Akwa Ibom Investment Corporation, as part of the Arise Agenda of Governor Umo Eno as an investment property. Of late, real estate investors have been trooping to Lagos to buy investment properties. There is no surprise about this. Not less than thirty incumbent and former governors of states in Nigeria have properties in Lagos State. And the headquarters of the majority of multinational companies, including oil firms, are in Lagos. This is borne out of the fact that Lagos State was the federal capital of Nigeria until 12 December, 1991. Lagos is Nigeria’s commercial capital, hub of commerce, innovation, and hospitality.

It is the most populous state with about 22 million people and exhibits the greatest potential for job opportunities, so there will always be demand for rental properties. Lagos property market is one of the smallest in Nigeria in terms of size but highly active in terms of transactions despite regulatory lapses. It has an area of 3,475 square kilometres. It is bordered mostly by water (Atlantic Ocean) to the south and has the most vibrant port in Nigeria. It also has Nigeria’s busiest international airport (Murtala Muhammed International Airport). Below are the reasons why Lagos property market is the bride of investors:

Average rental value as a measure of return on investment: The average rent for 3-bedroom apartments in Lagos varies significantly depending on the location. In higher branded areas like Ikoyi, Ikeja GRA, Victoria Island, Lekki Phase I and Apapa GRA, rents can range from ₦10,000,000 to ₦25,000,000 per year (py). In more affordable areas like Gbagada or Omole, rents typically range from ₦3,500,000 to ₦7,500,000 py. Low-income areas like Agege, Mushin, Ajah and Bariga also perform better than the most prime areas of some states in Nigeria in terms of rental income. Rents in these lower branded areas range from ₦600,000 to ₦1,500,000 py.

Rental yields: Average rental yields in Lagos can be as high as 5% -10%. In prime locations such as Banana Island, Ikoyi, Apapa GRA etc, yields are generally higher, ranging from 7% to 10% due to higher property prices and the luxurious nature of these areas. In medium-income areas like Ebute Metta, Surulere, Omole and Obalende, yields can be moderate and range from 6% to 8%, while in low-income areas like Mushin, Oshodi, Isolo, Ipaja and Agege, yields can range from 4% to 6%.

Value per square metre of property: The price per square meter in Lagos also varies by location. In upscale areas like Atlantic City (former Bar Beach), value per square metre can be as high as ₦12 million. In Banana Island and Ikoyi, value can reach up to ₦10 million per square metre. In moderate areas like Yaba, Ebute Metta, Surulere and Gbagada, values can range from ₦4 million to ₦6 million per square metre, while in low income areas, the value can range from ₦250,000 to ₦1 million per square metre.

Property appreciation rate: High property appreciation rates in Lagos are influenced by infrastructure development like tarred roads, relatively high social life in Lagos due to the presence of sea port and airport, and high rate of demand for houses due to relatively higher rate of job opportunities. In areas like Banana Island, Ikoyi and Atlantic City, appreciation rates can be as high as 10 percent annually. In lesser branded areas like Lekki, Omole and Surulere, appreciation rates can be around 5% to 8% annually. Lagos is a state of aquatic splendour.

Vacancy rates: Vacancy rates in Lagos communities are relatively low because it has the best opportunities for living. Prime locations like Banana Island, Orange Island, Ikoyi, Ikeja GRA and Apapa GRA, have lower vacancy rates, often below 5% due to high demand for rental properties. In less branded areas, vacancy rates are less than 10 percent.

Land title: Lagos State has a relatively higher rate of land having titles like Registered Conveyance, Registered Deed of Partition, and Certificate of Occupancy. This means that people can transact business more in Lagos land than in any other state. Land is gold in Lagos State!

Land prices: Land prices in Lagos are among the highest in Nigeria. In areas like Banana Island, Lekki Free Trade Zone, Ikoyi, Atlantic City, Victoria Island, Ikeja GRA, Alaro City etc, prices can exceed ₦0.5 million per square metre. Lagos State government gives priorities to land development and have turned Epe Local Government into New Lagos under New Town Development Authority (NTDA).

Availability of state of the art properties: There is an average higher rate of property developers in Lagos State than any other cities in Nigeria producing, in most cases, state of the art properties. This is because of the economy of Lagos which is the biggest in Nigeria and in Africa. Most real estate investors invest in locations with good rental income and good compound annual growth rate (CAGR).

Construction cost: Construction is relatively cheaper in Lagos because of the availability of cheaper imported building materials. Construction costs are influenced by material prices, labour and government approval fees. On average, building costs range from ₦250,000 to ₦500,000 per square metre in Lagos State, depending on the quality of materials and finishes.

Availability of finance like joint ventures and mortgages: Lagos State has high potential for attracting joint ventures and mortgage loans. Property developers are in large numbers looking for prime land to develop.

Infrastructure development: Ongoing infrastructure projects, such as the five pass-overs on the Lagos Rail Mass Transit, road expansions and Independent Power Project (IPP), are boosting property values in Lagos.

Market trends: The Lagos real estate market is characterised by a high demand for luxury apartments and a growing interest in affordable housing. Developers are increasingly focusing on residential, commercial, tourism and hospitality, and industrial developments to cater for diverse market needs.

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