A real estate boom is a natural byproduct of emerging market growth via rapid urbanization. As growth moderates, particularly as seen in African markets, the rate of construction activity remains rapid. What are the constructions and how has it affected the commercial sector in Nigeria?

The commercial sub-sector of the real estate industry provides great opportunity for returns as Africa’s economic boom is sustained. Of the near 23 million m2 in shopping malls in Africa, 21 million m2 sits in South Africa and 0.5 million m2 is in sub-Saharan Africa (excluding South Africa). Similar figures are found in the office space subsector – 2 million m2 in sub-Saharan Africa (excluding South Africa) as compared to 4 million m2 in North Africa and 15 million m2 in South Africa. Navigating a blank slate in many instances, real estate investors approach the continent with the mixed ambition of Michelangelo and Donald Trump.



Yet, the “Africa opportunity” as regards to commercial real estate has started going south of 25 percent per annum returns as was seen in 2011, after putting in place strategies to tackle unexpected hurdles, like poor urban planning, unfinished neighboring infrastructure (i.e., unpaved roads), and boosting the financial power of local developers.

It’s no longer news that Nigeria is opening up Africa in the area of Real estate development with its mega and midi cities. But why is Nigeria rates amongst the top five African countries that has become the newest destination for real estate investments?

On the surface, Nigeria is the real estate investor’s dream canvass. It has become Africa’s largest economy with burgeoning middle class. Its 170 million-plus population loves to shop and consume. As companies flood the market, office space is lacking, such that prime office space rents as high as $85 per square meter, according to local renters.

The Ikeja City Mall, a 28,522 square metre mall in Lagos, which was backed by London-based private equity firm Actis in 2011, is unofficially considered the second mall to open in the country. Numerous malls have opened throughout the country since 2011. Even the recent boon in commercial space might not meet Nigeria’s rapidly growing demand.

Opportunities for retail development abound with only two international standard malls in operation in Lagos (The Palms, Lekki and Ikeja Mall) and two in the pipeline (Festival Mall by UACN Property Development Company (UPDC) and Falomo Shopping Centre redevelopment by Hiers Holdings in conjunction with Lagos State Development Property Corporation (LSDPC). The re-development will also include commercial office space and luxury residential apartments. Prime retail rents currently stand at US$1,800 per square metre.



The laws and regulations put in place by the Government has greatly reduced the issues that previously affected such investments like low tax rate and regulatory laws.

The retail sector continues to offer strong opportunities for institutional investment returns based on the demand for consumer goods from the emerging Nigerian emerging middle class, the demand by international retailers for world class retail space in order to access a market of 160 million consumers and the attractive return on investment figures generated by existing malls.