Nigeria’s real estate sector contributed 13.10 per cent to the country’s real Gross Domestic Product (GDP) in the first quarter of 2026, highlighting its growing importance to the economy.

The construction sector also recorded a year-on-year growth of 6.38 per cent during the period, according to Knight Frank’s H1 2026 Lagos Market Update.

The report, released on Monday, October 19, noted that rising property costs, infrastructure development and changing demand for residential and commercial properties were shaping the market across major cities, including Lagos, Abuja and Port Harcourt.

Despite the sector’s contribution to economic growth, high construction costs and housing affordability remain major concerns for developers, investors and prospective homeowners.

Rising Property Costs Affect Housing Demand

In Lagos, rising rents and limited formal housing supply continue to put pressure on tenants, particularly in high-demand areas.

Prime locations such as Ikoyi, Victoria Island, Banana Island and Lekki Phase 1 have recorded significant increases in rental prices, with rents reportedly more than doubling since 2023.

As a result, some tenants are turning to more affordable accommodation on the mainland, including studio apartments, mini-flats and two-bedroom properties.

The trend reflects the growing need for housing options that match the budgets of residents while meeting demand in the state’s expanding urban areas.

Infrastructure Projects Open New Investment Opportunities

Ongoing transport and infrastructure projects are creating opportunities for property development in emerging locations around Lagos.

Rail expansion projects and upgrades along the Lekki-Epe corridor are helping to draw attention to areas such as Ajah, Sangotedo and Ibeju-Lekki.

These locations are attracting interest as developers and investors look beyond established property markets in search of new opportunities.

However, the long-term benefits will depend on how effectively infrastructure development supports accessibility, housing supply and demand in surrounding communities.

Commercial Property Market Shows Mixed Performance

The report also highlighted differences in performance across Nigeria’s commercial property market.

In Lagos, rents for Grade A office space have stabilised at approximately $55 per square metre monthly. Landlords are offering incentives, including fit-out contributions and flexible lease terms, to attract and retain tenants.

Meanwhile, industrial properties in Alaro City and the Lagos Free Zone command rents of between $4 and $6.50 per square metre monthly.

Retail demand is also shifting towards neighbourhood shopping centres and convenience-based formats as businesses respond to changing consumer needs.

These trends suggest that property performance increasingly depends on location, affordability and the specific needs of tenants.

Abuja and Port Harcourt Record Property Market Activity

In Abuja, property values have increased in some districts, with Guzape I and II recording growth of between 20 and 30 per cent, according to the report.

Established areas such as Maitama, Asokoro and Wuse 2 are also experiencing urban regeneration, supported by diaspora investment and demand for modern office spaces.

Commercial rents in Abuja reportedly increased by more than 10 per cent in the first half of 2026.

In Port Harcourt, demand for modern residential, commercial and industrial properties continues to receive support from the oil and gas industry.

However, older commercial buildings may need refurbishment to remain competitive as businesses increasingly seek modern facilities.

Affordability Remains a Major Challenge

Frank Okosun, Senior Partner and Chief Executive Officer of Knight Frank Nigeria, said the market remained resilient, although performance varied by location and property type.

He noted that infrastructure development could create new opportunities, but investors and developers needed to consider affordability, operating costs and actual market demand.

Knight Frank’s Lead Research Analyst, Daniel Fabi, also highlighted the growing preference for properties that offer value and functionality.

The report suggests that developers who understand local demand and provide suitable housing and commercial spaces may be better positioned to respond to changing market conditions.

Conclusion

Nigeria’s real estate sector remains an important contributor to economic activity, accounting for 13.10 per cent of real GDP in the first quarter of 2026.

However, rising construction costs, expensive housing and changing tenant preferences continue to shape the industry.

As infrastructure projects expand and demand shifts across major cities, developers and investors will need to balance profitability with affordability and the changing needs of property users.

The sector’s future growth will depend not only on investment but also on its ability to deliver properties that meet genuine market demand.