Softer rental prices in the short to medium term and increased demand for studios and 1-bedroom apartments are some of the upsides the 1,200 residential housing units expected on Freedom Way will bring to the Lekki Phase 1 property market, according to a new report.
On the contrary, new hotel apartments that will shrink demand for short-lets, pressure on the available infrastructure and aggravated traffic bottleneck are the downsides of these pipeline developments that are expected to be delivered by the end of 2024.
These developments are following the growing relevance of that neighbourhood which is a hub for residential and commercial activity alongside its affluent population. They are encouraging developers to take positions within the neighbourhood.
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The ongoing construction of a regional road by the Lagos State government is another major reason developers are taking a position as that infrastructure is expected to lure more residents to the area.
Already, sourcing for large land parcels of up to 3,000 square metres and above on the major roads in the region such as Admiralty Way, Adebayo Doherty Road, Bisola Durosinmi Etti etc is difficult, according to the report compiled by Estate Intel, an online real estate tech company.
“This has pushed developers to outskirts or border areas, where there are a handful of large land parcels,” Martin Uche, a senior researcher at the company, noted.
“On one hand, we expect that this large pipeline of residential units will further strengthen Lekki Phase 1’s relevance as a major residential hub and also project that it will mop-up current demand for short let apartments in residential conversions,” Uche posited.
However, Segun John-Adejumo, the managing director of Precioso Homes, had told BusinessDay in an interview that short let apartments are currently in high demand and would remain so for a long time to come, recalling that short-lets were recording full occupancy even at the peak of Covid-19.
He encouraged investors with a strong appetite for rental and lease yield to invest in that segment of the market as, according to him, demand is still high and the yield is encouraging.
But, with the new developments coming in their numbers, Uche hopes there would be softened rental prices amid slightly aggravated congestion at the Freedom Way. One way or another, he said, these developments “will affect infrastructure, property prices, and the growing short let narrative, over the next few years.”
To give investors and home seekers a real sense of the opportunities and challenges in the entire Lekki Phase 1 corridor, Estate Intel is tracking 1,376 completed multi-family residential units in that neighbourhood. The pipeline for the region is estimated at 3,332 units. Based on this data, Freedom Way alone will have about 35 percent of the total.
The report reasons that, although demand could absorb this disruptive supply in the long run as the population continues to grow and the region becomes more relevant, the first impact of the supply shock will be softened rental prices.
It likens the development to what happened in the office sector between 2016 and 2018 when additional supply came into the market, even though that was worsened by the recession, the election and other factors. “We expect that pricing for residential units in Lekki Phase 1 will, at least, soften in the short to medium term, including daily rates for hotel and short-stay lets,” Uche stressed.
It is estimated that 46 percent of expected stock from the pipeline projects will be used as hotel apartments such that it will mop up demand for short lets in Lekki Phase 1.
An agent, who did not want to be mentioned, explained that the Purple and Edmark City projects, which constitute about 46 of the pipeline, would largely be used as hotel apartments when completed.
The expectation is that these projects, alongside the other existing purpose-built hotel apartments on that stretch, will mop up demand for short- lets, making it harder for the existing residential conversions to maintain high occupancy levels.
