The Lagos residential real estate market has seen phenomenal growth over the past few decades. With values increasing across all locations, some neighbourhoods, however, have seen a record-level rise in prices and occupancy rates. For instance, our interaction with long-standing agents shows that a plot of land in Lekki Phase 1 now averages over ₦300million in sales value, once sold for ₦3m in 2001. Our hunch is that a number of people who knew Lagos a few decades ago would wish they could take back the hand of the clock. A number of us wish property prices in Lekki Phase 1 can go back to when a plot of land, for instance, sold for ₦10million or less. Or even back to 2008 when we saw a handful of land transactions closing at ₦50million. But this is not possible, and that is why we are constantly thinking “Where is Lagos’ next Lekki Phase 1?” and how can investors position to tap into a similar opportunity again? Picking a page from the Lekki Phase 1 story, we have analysed some of the factors that will drive new city development in Lagos with some insight on how to position for the opportunity ahead.
Deep dive into the past 2 decades in Lekki Phase 1: what really happened?
Before we dive deep, what really drives the growth we have seen in Lekki Phase 1? Some will argue a number of factors and frankly, several factors drive real estate growth in general. But in the context of Lekki Phase 1, LOCATION and INFRASTRUCTURE did the job, and here is how. Victoria Island and Ikoyi are notably Lagos’ luxury residential and commercial core. Better infrastructure and planning in Victoria Island drove a mass migration of businesses from the then Commercial Business District of Lagos Island to Victoria Island. Since time immemorial, Ikoyi has always been known as the playground of the ultra-wealthy, even though the majority of Ikoyi residents in the ’80s and early ’90s were expatriates and top government officials.
These two areas are unarguably the most prominent neighbourhoods in Lagos and are both less than 5 minutes drive from Lekki Phase 1. It makes sense that the closeness of Lekki Phase 1 to Lagos’ commercial nerves - Victoria Island and Ikoyi contributes to driving investment interest, while the attention that the Lagos State Government gave in providing infrastructure, opened up the new city. But one thing is clear, property prices in Lekki Phase 1 are now significantly high. With land price averaging over ₦300k/sqm, Lekki Phase 1 has become the 4th most expensive land location in Lagos, after Ikoyi/Banana Island (both averaging over ₦600k/sqm), Victoria Island (₦500k/sqm), and Ikeja GRA (₦400k/sqm). At this rate, it is obvious that the neighbourhood is fast becoming a playground for the ultra-wealthy, and early subscribers who were able to tap into the market are now reaping the reward.
There is no need to flog a dead horse, and that brings us to the critical question, where is the next big thing? Where can we expect growth similar to Lekki Phase 1? Does this type of opportunity still exist? Are there other growth areas to look out for? We have some ideas and will love to share them further.
Where is Lagos' next Lekki Phase 1 and what will drive the expected surge in property prices?
Over the past two decades, the residential real estate market in Lagos has remained the biggest growth driver for the sector. Land, on the other hand, has sustained its position as a major store of wealth for investors with patient capital. In the next few years, a handful of new cities will emerge, and we expect to see real estate development in Lagos moving further to the outskirts of town. Similar to Lekki Phase 1, this growth will be underpinned primarily by infrastructure allocation. Here are a few locations and some of the infrastructures that we expect to drive growth over the next decade.
In our next article, we will discuss these locations in greater detail, providing insights on how investors can position themselves to tap into the opportunities in these emerging locations. We would love to hear from you. Please send your comments and feedback to [email protected] and we will be in touch.