Lagos' industrial real estate market shows resilient despite challenges

Lagos, the most populous city in Nigeria, has long been a hub of economic activity and a melting pot of cultures. Despite the economic challenges facing the country, a recent report by the global real estate firm Cluttons Nigeria has shed light on the resilience of Lagos' industrial real estate market. The CEO of Cluttons Nigeria, Erejuwa Gbadebo, joined CNBC Africa to discuss the findings of the report and provide insight into the dynamics of the real estate market in Lagos. The industrial real estate market in Lagos has emerged as a standout performer amidst the economic headwinds in Nigeria. Unlike other sectors that have been significantly impacted by foreign exchange fluctuations, the industrial space has remained relatively stable. Historically, individuals have tended to build their own warehouses rather than rent them, resulting in limited supply and consistent demand. This unique characteristic has shielded the industrial real estate market from the challenges faced by other sectors, making it an attractive option for investors. One of the key factors contributing to the resilience of the industrial real estate market is the pricing structure. Unlike sectors that transact in foreign currency, industrial real estate in Lagos is priced in Naira per square foot, insulating it from currency fluctuations. Additionally, the high demand for industrial space coupled with limited supply has created a favorable environment for investors looking to capitalize on this segment of the market. While the industrial real estate market presents compelling opportunities, there are challenges that investors need to navigate. The CEO of Cluttons Nigeria highlighted the high cost of land and construction materials as key factors that impact investment decisions in the real estate sector. Despite the growing demand for industrial space, the high entry barriers in terms of acquisition and development costs may deter some investors. In contrast to the industrial real estate market, the residential segment in Lagos is characterized by dynamism and fragmentation. The CEO pointed out that the most resilient segment of the residential market caters to the average individual rather than high-end luxury properties. Investing in middle-class housing, which offers affordable yet quality accommodation, has been identified as a promising avenue for future growth. The CEO emphasized the importance of strategic investments in areas with emerging potential, such as the commuter belt surrounding Lagos. By focusing on affordable housing projects and land speculation in up-and-coming areas, investors can position themselves to capitalize on the shifting dynamics of the real estate market. It was noted that while land values tend to appreciate over time, careful due diligence is essential to ensure the legitimacy of transactions and mitigate risks. In summary, the real estate market in Lagos presents a mix of challenges and opportunities for investors. The industrial sector stands out for its resilience and stable pricing structure, making it an attractive option for those seeking long-term investments. On the other hand, the residential market offers prospects for growth in middle-class housing projects and strategic land acquisitions. By navigating the complexities of the Lagos real estate market with informed decisions and prudent strategies, investors can unlock the untapped potential of Africa's largest city.