The real estate sector emerged as the seventh-largest contributor to Nigeria’s GDP in 2023, accounting for 4.57%, highlighting its enduring significance amidst economic challenges such as high inflation, currency depreciation, and elevated interest rates over the past 18 months. A substantial housing deficit, estimated at 28 million units, further underscores the sector’s importance. This report focuses on the office space market, a vital segment of commercial real estate, with Lagos and Abuja as primary hubs. In Lagos, the office space market is bolstered by population growth and rapid urbanisation. Office buildings are categorised into Grades A, B, and C based on amenities, age, rental costs, and tenant profiles, with Grade A representing the highest quality. Conversely, Abuja’s market is predominantly Grade B, with limited Grade A options. Ownership of Grade A offices is primarily concentrated among private equity firms and multinational corporations, reflecting the significant capital requirements for such developments.
Agusto & Co. identifies distinctive characteristics in the Lagos and Abuja office space markets, including high leverage, substantial capital needs, extended project timelines, and attractive investment returns. However, challenges such as rising input costs, deteriorating macroeconomic conditions, inadequate infrastructure, security concerns, and shifting work patterns persist. Opportunities also exist through robust population growth, urbanisation, increased economic activity in key areas, alternative financing options, and flexible rental arrangements. While these factors may enhance market resilience, ongoing macroeconomic weaknesses and the trend toward remote work could temper growth prospects in the office space segment.
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