Lagos is a tough place to do business but investing in the West African city can prove fruitful if entered with a long-term view, this is according to Jonathan Millard of Troloppe Property Services.
The Central Bank of Nigeria states the Lagos real estate sector is valued at 45.6 billion dollars, 8 per cent of Nigeria’s GDP, however with the current challenging business environment, real estate in Lagos could prove to be an interesting investment.
“I think number one to think about in Lagos is the population driving the growth, we have 20 million people by some estimates living in Lagos state and 600 thousand growing per year – over the past five years growth has been driven by relatively high oil prices,” said Jonathan Millard, Chief Operating Officer of Troloppe Property Services.
Millard also states that the accelerator may be on the fact that a lot of international companies have been entered into the state because Lagos is being seen somewhat as a “must be” location but he also states that this may only last a couple of years as “a lot of these companies are not coming anymore”.
Adding to that oil sector companies reducing their staff up to as much as 50 per cent also play a major part on the rental sector for both office space and residential spaces.
Looking at the high-end side of Lagos about 250 thousand people of the 20 million population, Millard says he’s noticing a decline in rates.
“The rates are dropping, particularly in the residential space rates are coming down from their peak in 2008/2009 when oil was peaking – because this market is heavily driven by the price of oil, we are looking at a decline of 40 – 60 per cent in rental rates,” said Millard.
Millard states that up until two or three years ago, the retail office space was completely under supplied and now it is seeing a massive oversupply. Research at Troloppe Property Services shows that there is more office spaces that have come online in terms of square meters in the last 2-3 years than there are exiting.
“I think the number one advice is take a long term view, What we have learned in the year is that it is still a very risky place to do business and its somewhere that you need to take more than 3-5 years view, you have to need to take a 10 – 15 year view and you need to look at getting your returns over that period.”