Investment Rating - The report indicates a positive outlook for the Lagos real estate market, highlighting its role as a major economic pillar in Nigeria, particularly after the GDP rebasing exercise [4][15]. Core Insights - The Nigerian economy is transitioning towards stabilization and growth, with a notable GDP growth of 3.98% in Q3 2025, driven by a resilient non-oil sector [5][15]. - Real estate has emerged as the third-largest sector in the rebased economy, contributing 13.36% to total real GDP, underscoring its structural importance [9][15]. - Inflation has moderated significantly, decreasing from 25.3% in June to 15.15% by December 2025, which is expected to support market stability [12][15]. - The naira has stabilized within a managed band, supported by a significant increase in external reserves, which reached $45.45 billion by December 2025 [13][15]. - The enactment of the Nigeria Tax Act 2025 is anticipated to enhance the macro environment for real estate, promoting formal agreements between landlords and tenants [14][30]. Economic Update - The GDP rebasing exercise revealed a larger and more diversified economy, with nominal GDP revised upward by 41.7% [4]. - Real estate's contribution to GDP highlights its critical role in national wealth, with a quarter-on-quarter growth rate of 3.50% [5][9]. - The construction sector outperformed the broader economy with a real growth rate of 5.57%, driven by public infrastructure projects [11]. Residential Market Review - Residential rents in Lagos continued to rise despite moderated inflation, driven by strong demand and constrained supply [22][32]. - Government interventions have facilitated the delivery of 653 residential units through public-private partnerships [23][32]. - The launch of the MOFI Real Estate Investment Fund offering long-term loans at 9.75% indicates ongoing public sector efforts to address housing shortages [24][32]. Retail Market Review - The retail sector has seen limited new development, with a gradual reconfiguration of tenant mix and retail strategies [33][39]. - Indigenous convenience-focused brands have gained traction, reflecting a shift towards cost-efficient retail formats [33][39]. - The average prime retail rents in Lagos are aligned with several African peers, indicating competitive pricing [35]. Office Market Review - The Lagos office market is showing signs of recovery, with Grade A occupancy levels reaching 73% [40][47]. - Rental performance has softened, particularly for prime assets, with effective rents adjusting downward to support occupancy [41][47]. - The emergence of new office developments in Ikeja indicates continued demand for modern office spaces [43][47]. Industrial Market Review - The industrial sector remains resilient, supported by logistics demand and manufacturing activity within Special Economic Zones [49][56]. - Prime industrial rents vary significantly based on infrastructure quality, with Grade A demand accelerating in well-serviced areas [51][56]. - The demand for warehouse spaces has grown approximately 25% year-on-year, reflecting the sector's expansion [74][56]. Infrastructure and Data Centre Market Review - Key infrastructure projects, including the Lagos–Calabar Coastal Highway and the Lagos Green Line Rail Project, are advancing, enhancing connectivity [57][63]. - The data centre market in Lagos is valued at approximately $1.4 billion, indicating strong investor interest and capacity additions [59][63]. Port Harcourt Real Estate Market - Port Harcourt's real estate market is driven by the oil sector, with residential demand growing at an estimated 12-15% [65][87]. - The retail sector has expanded significantly, driven by a rising middle class and consumer preferences for modern shopping environments [67][87]. - Industrial land prices have risen 10-20% over three years, with demand for warehouses increasing by about 25% year-on-year [74][87]. Abuja Real Estate Market - Abuja's real estate market is characterized by high demand and strong capital appreciation, with average property prices projected to rise by 10-15% annually in prime areas [81][98]. - The market is shifting towards integrated, technology-enabled commercial spaces, reflecting evolving tenant needs [85][98]. - The persistent housing deficit and urbanization are driving demand for middle-to-low-income housing in satellite towns [92][98].

Market Overview - The recent CPI data came in well below expectations, particularly the core CPI reading, which is significant as two-thirds of the basket consists of core services [1][2] - Historical data indicates a 73% chance of a Santa Claus rally occurring in the last five trading days of the year and the first two trading days of the following year [2] Economic Outlook - The market has been moving sideways, but there is potential for a year-end push, with confidence in economic and earnings growth heading into 2026 [3] - Earnings growth is expected to be in double digits for the upcoming year, driven by earnings growth and valuation expansion [3] Sector Analysis - There is limited scope for valuation expansion in the tech and growth sectors, but opportunities exist in other market segments outside the major tech companies [4] - Preferred sectors for investment include healthcare, industrials, and consumer discretionary, with a positive outlook for these areas heading into 2026 [4] Consumer Behavior - The current environment of lowering interest rates by the Fed is favorable for consumers, particularly impacting mortgage rates and benefiting high middle and high-income consumers [6] - The high middle and high-income consumer segment is crucial for driving overall economic activity [6]

Economic Outlook for 2026 - The outlook for 2026 is positive, with expectations of improved labor market conditions and consumer spending supported by tax incentives and potential tax refunds [3][4][5] - The Federal Reserve is expected to maintain a cautious approach, likely avoiding rate cuts early in the year while setting a high bar for rate hikes, which could lead to a reacceleration of growth [5][14] Labor Market Insights - Current payroll data indicates negative growth, but there are signs of a potential turnaround, particularly with recent positive trends in ADP payroll numbers [7][9] - The labor market is expected to show improvement, especially for lower-income workers, with projections of increased hiring and wage gains [26][27] Inflation Trends - Inflation is anticipated to moderate, with projections suggesting a decline from 3% to around 2.5% by the end of 2026, driven by changes in goods and services prices [12][13] - The consumer price index (CPI) is expected to reflect ongoing volatility, particularly in goods prices, while service prices may continue to decrease [10][11] Consumer Health Assessment - The health of lower-income consumers is rated at a C minus, indicating challenges but not failure, while higher-income consumers are performing significantly better, receiving an A or A+ [22][23] - There is potential for improvement in consumer grades, particularly for lower-income households, as wage gains and payroll increases are expected to accelerate [25][26] Federal Reserve Leadership Preferences - There is a preference for Kevin Worsh as a potential Fed chair due to his academic background and perceived distance from political influence, which may enhance market credibility [28]