In 2020, the GDP of the Nigerian real estate industry was ₦3.96 trillion, a 9.4% decline from the prior year’s ₦4.37 trillion. The Lagos Real Estate Market was adversely affected by a slowdown in business activities and job losses, elicited by the coronavirus (COVID-19) pandemic.
According to the World Bank, one major change observed as a coping mechanism at the peak of the COVID-19 pandemic was an increase in the size of households from an average of 5.5 members in February 2019 to 6.6 members in November 2020. A major reason for this development is that individuals moved in with parents or other relatives to pool incomes and manage the challenges faced through the COVID-19 crisis. The housing deficit in Nigeria remains high at about 22 million, comparing less favourably to other African countries like South Africa, Kenya, Angola and Ghana with housing deficits of 2.3 million, 2 million, 1.9 million and 1.7 million respectively. The huge gap between Nigeria and its peers is due to the large and increasing population in Nigeria coupled with other factors such as considerable rural-urban migration, high interest rates on mortgages and weak capacity building in the industry.
The commercial real estate market in Lagos which comprises office space, retail, hospitality and industrial sub-segments was also impacted by the COVID-19 pandemic as many organisations shutdown activities to comply with the lockdown restrictions imposed by the government to curb the spread of the virus. In addition, some expiring lease contracts were not renewed in 2020 due to the emergence of remote working. The hospitality segment witnessed a drop in occupancy rate to circa 25% in 2020 from about 40% in 2019. Many operators in this segment, particularly hotels, were forced to include “meal take-outs” as a service offering to moderate revenue losses during the year.
In the industrial sub-segment, there is rising demand for warehousing and logistics services from e-retailers driven by opportunities arising from the lockdown restrictions imposed by the government. We predict that this demand will remain strong post-COVID as e-commerce related demand and supply growth continue to move along an upward trajectory.