2024-03-18-莱坊-Lagos_Market_Update_H2_2023_8页_369kb

Lagos Market Update Summary - H2 2023

Core Content Overview

The Lagos Market Update H2 2023 provides a detailed analysis of the real estate market performance in Lagos, Nigeria, the second-fastest-growing city in Africa. The report highlights the impact of macroeconomic challenges, including currency devaluation, inflation, and FX policy changes, on various real estate sectors such as residential, retail, office, and industrial. It also discusses the new leadership in the Central Bank of Nigeria (CBN), recent developments in the real estate industry, and the role of the government in shaping housing and urban development policies.

Key Economic Developments

Naira Anguish

• The Naira has weakened significantly, reaching an all-time low of N1,000 to 1 USD on the parallel market.
• This is attributed to low oil receipts, increasing demand for foreign exchange, and market disequilibrium.
• Inflation has risen to 22.79% in July 2023, up from 22.41% in May, with the highest inflation rate in over 27 years at 28.2% in December 2023.
• The Monetary Policy Committee (MPC) raised the Minimum Reserve Ratio (MPR) to 18.75% from 18.5% in July 2023 to curb inflation, despite the postponement of subsequent meetings due to leadership reshuffling.

Central Bank Leadership

• Godwin Emefiele was suspended as CBN Governor.
• Folashodun Shonubi served as acting Governor.
• Yemi Cardoso, a seasoned banker, was confirmed as the new Governor.
• The CBN is adopting an evidence-based monetary policy to address inflation and the Naira's depreciation.

Real Estate Market Contributions

• Q4 2023 GDP growth was 3.46%, driven by the services sector.
• The construction sector contributed 3.47% to real GDP, slightly higher than the previous quarter.
• Real Estate contributed 6.06% to real GDP in Q3:2023, indicating a steady but moderate contribution.

Residential Market Trends

• Gated neighborhoods like Parkview and Osborne in Ikoyi are seeing a shift towards rental multi-family units.
• Yield convergence in Parkview signals a balanced supply and demand for residential properties.
• The space economization trend is evident as occupants seek to reduce service costs.
• Developers are modifying pricing strategies due to rising inflation and exchange rate fluctuations.
• There is a scarcity of budget-friendly luxury residences, prompting the conversion of standalone units to multifamily properties.

Retail Market Outlook

• Inflation has stretched incomes, increased poverty, and impacted consumer spending.
• Retail footfalls have been slightly affected, though core retail spaces remain stable.
• Tenants are operating under existing lease agreements, making it difficult to assess price adjustments.
• Retailers are increasingly favoring local currency rental rates.
• Grosvenor's Place, a 1,004 sqm retail space in Ikeja, is a recent example of neighbourhood-focused retail development.
• Novare is offering minority interests in Grade A malls to new investors.

Office Market Dynamics

• The office market has shown stability in rental rates and steady demand.
• Commercial landlords are using proactive retention strategies such as rent concessions and ESG alignment, resulting in low vacancy rates in prime buildings.
• Grade A office buildings maintain an average occupancy rate of 70-80%.
• Atlantic House achieved EDGE certification, highlighting energy efficiency and sustainability.
• The prevailing hybrid work model is influencing companies to reassess on-site space needs.
• Owner-occupiers are a significant trend in office space delivery, especially in Lagos.
• Office rents average around US$50 psm/month.

Industrial Market Challenges

• The industrial sector is facing challenges due to rising fuel prices, currency devaluation, and inflation.
• Foreign manufacturing companies are departing Nigeria due to adverse macroeconomic conditions.
• Stanbic IBTC reported a second consecutive contraction in PMI in November 2023, reversing the expansion trend.
• Special Economic Zones (SEZs) and Industrial Nodes are seeing increased demand and supply.
• There is a shortfall in Grade A warehouses, despite stable prime lease rates at US$5-6 psm/month.

Key Insights Summary

Contact Information

For more information or property inquiries, contact:

• Lanre Sonubi
  Head, Marketing and Corporate Communications
  Email: lanre.sonubi@ng.knightfrank.com
  Phone: +234 802 727 4129

• Yinka Omoniyi
  Associate Partner, Capital Markets
  Email: yinka.omoniyi@ng.knightfrank.com
  Phone: +234 802 849 9473

• Daniel Fabi
  Research Analyst
  Email: daniel.fabi@ng.knightfrank.com
  Phone: +234 905 309 0145

Conclusion

The Lagos real estate market is navigating a complex landscape marked by currency instability, inflationary pressures, and changing consumer preferences. Despite these challenges, there are opportunities for growth in residential and industrial sectors, supported by government initiatives and private sector developments. The CBN's new leadership and monetary policy adjustments will play a crucial role in shaping the market's future.