Cautious optimism trails 2026 projections for real estate sector – Businessday NG

After a strong 2025 marked by new development starts and momentum across multiple asset classes, Nigeria’s real estate sector is entering 2026 with cautious optimism. Demand remains resilient—especially in residential housing and digital infrastructure—yet macroeconomic pressures, elevated input costs, and tight financing conditions continue to temper expectations.

2025 momentum sets the stage

Developers were active in 2025, with pipeline activity accelerating across several segments. Digital infrastructure, particularly data centres, was the standout performer. The data centre development pipeline is estimated at 186.37 percent of total current stock, with national capacity projected to push beyond 218MW by 2030. Rising internet usage, the spread of cloud computing, and the growth of fintech are drawing significant interest from both domestic and global operators, positioning data centres as a leading growth asset for the medium term.

Residential demand is firm, but the gap is wide

The residential market is expected to remain busy in 2026, underpinned by strong demand from low- to middle-income households. While an estimated 34,800 housing units are in the pipeline, the gap remains substantial, with the market short by more than 2.7 million units. This shortfall continues to create opportunities for developers targeting affordable and middle-income segments, as well as the deluxe-grade category. Nonetheless, many developers are gravitating toward luxury projects where margins are more resilient to economic shocks.

Costs, financing, and affordability remain key constraints

Though inflation appears to be slowing, its impact has yet to materially ease construction and development costs. Affordability is a pressing concern for end-users, exacerbated by rising input prices and limited access to mortgages. These constraints are expected to shape demand patterns in 2026, sustaining the tilt toward rentals and delaying homeownership for many households.

Rental market pressures persist

Industry observers do not expect immediate relief in the rental market. Rents in prime locations are projected to climb further. Meanwhile, the rapid expansion of short-let apartments could face tighter oversight as regulators seek to safeguard long-term rental supply and protect tenant access.

Policy and infrastructure will influence the pace of growth

The sector’s outlook is closely tied to the effectiveness and continuity of federal and state infrastructure initiatives. Priorities include roads and transport connectivity, improved power supply, and the establishment of regional hubs for building materials to reduce logistics bottlenecks and costs. Ambitions to construct at least 500,000 homes annually, if paired with meaningful improvements in land administration and permitting, could help narrow the housing gap and stimulate broader industry growth.

Structural hurdles still loom

The pace of recovery and expansion will depend on progress in resolving structural challenges: land availability and titling, high financing costs for developers and buyers, and infrastructure deficits that weigh on project viability. Market participants also flag potential headwinds from evolving regulations and election-related uncertainties that could affect investor sentiment and timing.

Where growth will likely concentrate in 2026

• Affordable and middle-income housing: Demand is set to outstrip supply, sustaining development opportunities where viable financing and efficient delivery models exist.
• Digital infrastructure: Data centres and supporting assets should continue to attract capital, powered by cloud adoption, fintech expansion, and rising data consumption.
• Mixed-use schemes: Projects that blend residential, retail, and workspace elements are likely to benefit from diversified income streams and demand for convenience.

Outlook: Guarded optimism with an execution imperative

Overall, the sector approaches 2026 with measured confidence. Fundamentals in housing and digital infrastructure are supportive, and the pipeline remains active. Yet realizing this potential will hinge on execution: curbing construction costs, improving access to financing, streamlining land processes, and delivering on infrastructure commitments. With these enablers in place, the market could build on 2025’s momentum; without them, growth will likely be steady but constrained.