With limited availability of top-tier warehouse space, leasing rates have climbed to about $6 per square metre monthly, underscoring the premium now being placed on such facilities. This upward trend highlights the widening gap between demand and supply in Nigeria’s logistics and industrial real estate market.

According to the 2024/25 real estate market report by Knight Frank, the burgeoning demand for top-tier warehouses is discernible.

It stated, “Notably driven by the escalating storage and distribution needs in key industrial nodes and specialised economic zones, such as the Lagos Free Trade Zone, which has seen increased infrastructure spending from both the public and private sectors. The subdued supply of Grade A space has further exacerbated the situation, suggesting a gap between the demand for top-tier warehouse spaces and the available supply, thereby placing a premium on such facilities, with monthly leasing rates now going at approximately $6 psm, an increase of almost 10 per cent from the figures recorded in 2020.

“The commercial and residential markets face a resilience test amid various macroeconomic risks. Inflationary pressures from the removal of petrol subsidies and the floating of the naira have introduced economic uncertainties. Elevated capital costs have ensued, with the residential, retail and office markets being marked by a slowdown in requirements.”

The report noted that in the luxury residential leasing market, a nuanced challenge has emerged, driven by the escalating impact of inflation on construction costs.

It added, “To navigate this, build-to-rent developers are adapting their pricing strategies with a preference towards dollar-denominated rents. This shift is particularly pronounced among landlords servicing dollar-denominated loans and those procuring construction materials internationally. Ultimately, these costs are being transferred to tenants in the form of escalating rents. Currently, the average monthly rent for a four-bedroom apartment in Lagos is c. $5,000, an increase of 4.2 per cent since 2020.

“Mirroring other African nations, most businesses have made a full return to the office. Notably, the prime office occupancy levels in Lagos and Abuja stand at over 80 per cent. Despite this return in demand, office rental growth across Nigeria is being tempered by an oversupply of office space, especially in Lagos. For instance, the completion of Centrepoint (Famfa Towers) and Trinity Towers, located in Ikoyi and Victoria Island, respectively, have together added 30,000 sqm of new office space to the Lagos office market.

“Consequently, tenants remain firmly in the driving seat when it comes to lease negotiations. Monthly prime office rents have held steady for the third quarter in a row at c. $50 psm. The continuous rise in inflation, which reached a 28-year high of 33.2 per cent in March, has unsurprisingly lowered consumer spending, while retail footfall has also declined. Over the past 12 months, prominent retailers, such as the South African supermarket chains Mr Price and Shoprite, have exited the market due to the increasingly challenging trading conditions. Elsewhere, retail developers have turned their attention to neighbourhood mall developments and/or the expansion of neighbourhood malls, where footfall remains resilient.”

Despite challenges such as exchange rate volatility, rising inflation, and a tough investment climate, demands for warehousing continue to grow, driving up rental prices in major cities.

Notwithstanding the exit of some foreign manufacturing firms, Nigeria’s warehouse market is experiencing heightened demand, fuelled by rising international trade volumes, the rapid expansion of e-commerce, and the establishment of new manufacturing outfits.

Population growth has further intensified the need for strategically located warehouses to store and distribute essential goods such as food and beverages, automotive parts, healthcare supplies, agricultural produce, and retail products directly to consumers.

However, while the warehouse and industrial property segment is seeing a modest boom, the broader manufacturing sector continues to struggle, with many factories operating below optimal capacity.

The poor state of the economy has not encouraged much expansion in the warehousing space by manufacturers, as they grapple with unsold products worth N1.24tn piled up in warehouses during the first half of 2024.

The Manufacturers Association of Nigeria reported a concerning trend within the industry, revealing that about 767 manufacturing companies shut down operations, while 335 experienced distress in 2023 alone. The development was attributed to various economic difficulties, including exchange rate volatility, rising inflation, and a worsening investment climate.

MAN revealed in its first-half economic report by its president, Francis Meshioye, that the number of unsold goods jumped 357.57 per cent in 2024 compared to the same in the previous year. He lamented that people aren’t buying as much because of rising prices, the government’s removal of fuel subsidies, and the weakening value of the naira.

Many multinational firms, including GlaxoSmithKline, South African retailer Pick n Pay, Deli Food Nigeria Ltd, NASCO Fibre Product Ltd, Tower Aluminium Nigeria Ltd, Procter & Gamble, Sanofi and others, have recently exited the country. This further affected what could have been an increased demand for warehouses, as many remained vacant for years, while others were converted to other uses.

Despite the lull in manufacturing capacity, warehouses in urban centres and strategic locations in Ogun, Port Harcourt, Abuja, Ibadan, and Lagos have attracted increased rent, with prices ranging from N1.7m to N20m depending on size, location, and design.

The average price of warehouses for sale in strategic locations is between N100m and N450m.

Large manufacturing firms generally require between 500 and 1,000 square metres of operational space, with storage needs sometimes reaching as high as 36,000 square metres. While most modern warehouses are fully occupied, the remaining unoccupied facilities are largely outdated and in need of refurbishment. Strategic locations near ports and within special economic zones consistently demand upgraded, integrated warehouses, creating attractive investment opportunities for developers and investors.

The principal partner of Fisayo Alo & Company, a real estate firm, Fisayo Alo, said many manufacturing firms preferred to have their products warehoused in locations such as Ibadan due to the proximity to states like Ogun and Lagos, as the market commands cheap warehouse rent compared to Lagos. These factors, he explained, have ensured consistent high demand.

Quality properties for rent

He said, “There is a ready market in Ibadan and its environs, and it is easier to connect places like Ogun, Lagos, Osun, Ondo, and Ekiti states. There are industries too in Ibadan; these are factors fuelling warehouse demand. In terms of rent, a standard 1,000-square-metre warehouse goes for about N10m per year.

“If it is not standard, it’s about N7m. Standard speaks to whether it is modern, the materials used, available parking space, how easy it is to offload and load goods and the location’s accessibility. Standard warehouses command higher value and larger expanses of land compared to those in towns, where tenants must navigate through traffic snarls.”

Meanwhile, the rise of e-commerce has sparked a surge in demand for smart warehouses that harness cutting-edge technologies to streamline operations, boost efficiency, and reduce energy consumption. Sophisticated warehouse management systems, powered by the Internet of Things, enable real-time tracking of goods and inventory, minimising errors and maximising productivity.

As the industrial real estate market continues to grow, with an expected value of $140.07 bn by 2029, companies are seeking innovative solutions to optimise their logistics and supply chains. Multi-storey warehouses are emerging as a viable option, allowing businesses to increase storage capacity without expanding their footprint.

Moreover, sustainability is becoming a key focus in modern warehouse design, with features like energy-efficient lighting, solar panels, and advanced HVAC systems. By integrating these technologies and designs, companies can not only reduce their environmental impact but also improve their bottom line.

The future of warehousing is undoubtedly smart, efficient, and sustainable. As urbanisation and e-commerce continue to drive growth, the demand for cutting-edge warehouses will only intensify.

The Chief Executive Officer of GokeRhema Consultancy Services, Oyebode Oyegoke, noted that the demand for warehousing was rising sharply because manufacturers, e-commerce operators, and distributors need efficient storage solutions to meet growing market expectations.

He asserted, “Warehouses allow companies to store goods closer to end customers, ensuring timely deliveries and improving overall supply chain reliability. This proximity reduces transportation costs, increases flexibility in inventory management, and allows businesses to respond quickly to changes in demand.

“Modern warehousing is not just about storage; it optimises operations, streamlines logistics, and enhances customer satisfaction. For manufacturers, having nearby warehouses reduces lead times and enables faster replenishment of stock. For e-commerce and retail businesses, warehouses act as hubs for rapid order fulfilment, same-day delivery, and efficient returns management.

“Technological advancements, such as warehouse management systems and IoT-enabled tracking, have further transformed warehouses into highly efficient operation centres. These technologies improve inventory visibility, reduce errors, and allow real-time monitoring of goods, lowering costs and boosting operational efficiency. This combination of operational efficiency, cost savings, and customer-centric benefits is precisely why demand for warehousing continues to grow.”

The Chairman of the Rivers State branch of the Nigerian Institution of Estate Surveyors and Valuers, Nwokoma Nwankwo, observed that warehouses located within Port Harcourt and Onne Port always have high demand.

He, however, disclosed that areas used for huge business activities, such as Trans-Amadi, are struggling to maintain a business that will require a warehouse. In contrast, some of the companies have been relocated elsewhere.

He said, “Many years ago, you wouldn’t find a warehouse within Trans-Amadi easily; the Abuloma axis became the hotbed of property development, but it’s no longer like that.

“Some of the facilities are still occupied, but their use is low. The demands are not as they used to be within the Port Harcourt metropolis. It is a pointer that facility users may have left, particularly oil and gas sector operators who use warehouses.”

On the impact of smart design on warehousing facilities, Nwokoma emphasised that any improvement in property affects value and causes demand to soar.

He urged the government to improve the economy and initiate policies that boost the security of lives and property to revamp the industrial and economic life in major cities in the country.

Nwankwo added, “When we started having security issues many years ago, it affected the city. Many people relocated their businesses to Abuja. If the people who need these facilities want to return, it will take some time to trust the system.”