By the end of 2024, over 1,200 new residential units will be delivered along Freedom Way in Lekki Phase 1. The region’s growing relevance as a hub for residential and commercial activity alongside its affluent population is encouraging developers to take positions within the region.
Sourcing for large land parcels of up to 3,000sqm and above on the major roads in the region such as Admiralty Way, Adebayo Doherty Road, Bisola Durosinmi Etti etc., however, is difficult, and this has pushed developers to outskirts or border areas, where there are a handful of large land parcels.
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. On the other hand, we expect softened rental prices, and slightly aggravated congestion at the Freedom Way bottleneck if drastic steps are not taken. The map below profiles the major projects on and around Freedom Way and the points that follow explain how they will affect infrastructure, property prices, the growing short let narrative, and the Lekki Phase 1 residential market in general over the next few years.
Softer rental prices in the short to medium term
Even though the total stock is much larger, we are currently tracking 1,376 completed multi-family residential units in Lekki Phase 1. The pipeline for the region is currently 3,332 units. Based on this data, Freedom Way alone will have over 35% of the total projects that are in the pipeline in Lekki Phase 1.
Although demand may be able to 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. This can also be likened 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.
46% of the pipeline will be used as Hotel Apartments, this will mop up demand for Short lets in Lekki Phase 1
According to the Sales Representatives that we have been talking to, the Purple and Edmark City projects, which constitute about 46% of the pipeline, will largely be used as hotel apartments once completed. 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.
There is high demand for studios and 1 beds, and developers know this
Developers who have a footprint in the Lekki Phase 1 market or anyone who understands the neighbourhood knows that there is a growing demand for studios, 1 and 2-bed apartments. This is driven by young people in Lagos, who would typically trade large bedroom numbers for a better location.
Apart from its locational advantage, Lekki Phase 1 is also cheaper compared to Victoria Island and Ikoyi, with a handful of retail centres, a vibrant nightlife, restaurants, entertainment centres and many other amenities to sustain a youthful lifestyle. Lekki Phase 1 gives the Millenial and Gen Z vibe, and Studios, 1-bed and 2-beds are definitely the most affordable typology for this young population.
Developers such as Purple, Edmark City Development and many others with upcoming projects in Lekki Phase 1, are incorporating these typologies to maximise the growing demand in that space.
This large supply will aggravate traffic congestion along the Freedom Way bottleneck
It typically takes about 2 hours to commute from Freedom Way to Ajah bus terminal on an average weekday, and sometimes, commuters spend more than 30 minutes navigating out of Freedom Way alone. Based on the Lagos State Master Plan, Lagos State Government has plans to construct a bridge that will connect 3rd Mainland Bridge to the Proposed Airport in Epe through Freedom Way.
Apart from the bridge, the Lekki Regional road, which is currently under construction also runs through Freedom Way, alongside other smaller roads that currently link the Island. Once these roads are implemented, with the over 1,200 additional residential units that will be delivered along Freedom Way, the traffic would be even more than double except drastic efforts are made to provide alternative routes.
In view of this, we expect that Lagos State Government should consider doing the following to ease the traffic:
- Introduce new turning points into the right/north side of Freedom Way so that the existing ones are not clogged up or become new bottlenecks.
- Expand the bottleneck by introducing traffic lights.
- Introduce flyovers around Freedom Way to provide alternative means of exit.
While we are eager to see these really interesting projects delivered, it is extremely important for the sponsor to seek Infrastructural intervention from the government to reduce the pressure on existing infrastructure in the neighbourhood.
Let us know what you think about these projects and how they will impact the residential market in Lekki Phase 1 by sending an email to [email protected]