The Lagos Shortlet market has seen an accelerated growth period over the past three years. However, with the return to normalcy post-pandemic, although rife with opportunity, the market is now subject to external market factors such as rising inflation and diesel prices leaving the sector’s future at a crossroad.
Below we highlight our key takeaways from our recently published Lagos Shortlet market report.
1. The pandemic steered the growth of the Lagos shortlet market
The Lagos Shortlet market grew by an estimated 263% between 2019 and 2021. This growth can be attributed to the pandemic where shortlets emerged as an alternative to the typical hotel set-up. They also allowed for longer periods of stay at relatively affordable prices especially during lockdown periods, leading to the emergence of multiple operators across Lagos.
2. Significant Challenges lie ahead
However, the return to normalcy has seen the market prone to the seasonal nature of demand with peak seasons expected during the holiday season in Lagos such as September to December while off-peak seasons are expected between March and July.
Additionally, the sector has been impacted by additional external factors such as rising diesel prices as well as inflation impacting on overall returns as well as affordability respectively. For example, our interaction with market players indicates that the increase in diesel prices is set to result in additional costs to operators by up to N3.6million per annum due to monthly diesel costs of approximately N300,000 per month
Furthermore, with over 1,975 residential units of ‘shortlet type’ build under development, the market is anticipated to be oversupplied. We anticipate this will put pressure on existing rentals, especially the converted residential stock.
3. Location, Location, Location
Interestingly, with the market being increasingly saturated, key locations have emerged as better performers compared to others. Our analysis of the market indicates that Ikoyi, Victoria Island, Ikeja GRA and Lekki Phase 1 are the top shortlet hubs in Lagos.
In specific, Lekki phase 1 emerged as a stand out performer recording considerably higher occupancy levels at 80% compared to Ikoyi(60%) and Victoria Island(70%). Its demand has been noticed to emerge from a younger demographic who have a natural bias for more integrated urban lifestyle as evidenced in a previous survey conducted by Estate Intel where majority(39%) of the 250 respondents targeted selected Lekki as their most preferred location of choice
4. Flight to quality will be the key to survival
Overall, while the market has seen a saturation in shortlet operators, anecdotal evidence indicates that occupiers are increasingly preferring well managed and furnished shortlets. As such we are likely to see a flight to quality for hotel-operated apartments as compared to the initial model of providing basic styled and operated apartments.
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If you are interested in investing in the Lagos Shortlet market, you can get our extended Lagos Shortlet Handbook by emailing us at research@estateintel.com.
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