Our advisory team recently concluded a pre-feasibility study for a property located on one of Lagos's primary commercial corridors. The headline asking price from the land owner was ₦821,861 per SQM but our comparable transaction data placed the value of the assets at ₦629,213 per SQM at best. Before any external market shocks, the gap between those two numbers represented millions of dollars in entry cost exposure that could materially impact the profitability of the project before they even break ground.

That gap is not unusual. It is the pattern that erodes project viability before construction begins.

The share of institutional capital participation in African real estate has grown over the past 5 years. As African-native businesses continue to prosper we are seeing more indigenous firms actively investing a share of this prosperity in real estate assets either in building their corporate HQs or for rental cashflow. The impact of this growing interest in real estate has far reaching implications. Corridors that were predominantly residential or even undeveloped a decade ago are evolving into mixed-use commercial areas. Land values in established districts are rising materially. In Ikeja, Lagos’ administrative capital for instance, average prices have surged more than 44% per year since 2021, driven by institutional demand and the scarcity of large scale development plots.

From our experience tracking activities in the market, one pattern has remained consistent. A significant majority of institutional real estate decisions across the  continent are still based on intuition instead of data-driven. Multi-million dollar land acquisition decisions continue to be made without an independent, data-backed market analysis informing them. Institutional investors still rely on broker-supplied comparables, macro demand narratives, and anecdotal signals from adjacent transactions to determine what to build. The consequence of taking advice from the supply side of the market is always the same: cost overruns, and in the most acute cases, projects never reaching financial viability or becoming excessively overpriced.

Unlike the decades prior, we now have real estate focused, Africa-native data companies, so the gap is no longer a lack of access to data. The real gap is that most developers and institutional investors question if data really add value in real estate decisions. Is research really a “must-have” or a “nice-to-have”? The best time to solve a problem is usually before it exists. So before land is acquired, before capital is committed and every downstream decision is locked in, that first decision must be grounded in data and answer very specific questions.

This article examines five questions an investor-grade pre-acquisition study must answer, and how each one de-risks every decision that follows.

Land pricing is the first decision. It should not be made without independent data.

Across the continent land accounts for 20% to as much as 60% of the total cost incurred in real estate projects. Whether you are a passive or active developer, how much you pay for a land materially impacts the cost structure of the project and potential return. With the level of speculation in the market, agreeing a land price without independent data, a developer has no basis for negotiation and no framework for assessing value.

Recently, we conducted a pre-acquisition study on a site along one of Lagos's primary commercial corridors, the headline offer was ₦821,861 per SQM. Data from recent transactions we tracked across the corridor placed average asking prices at ₦629,213 per SQM. When adjusted for site-specific constraints, principally height restrictions, the market value on that land could be lower and formed the basis for negotiation.

Due to the size of the project, the gap between the seller’s asking price and recent comparable transaction data represents millions of dollars in entry cost over-run, before a single line of design has been drawn. That gap only became visible when we independently assessed where the market actually is, and what the specific site, with its specific constraints can credibly support.

Macro demand data reflects a corridor performance but needs to be adjusted for your specific project.

African real estate markets are frequently described as high-demand environments. That description is accurate at the macro level and operationally insufficient at the project level. Demand is not homogeneous, and city-level activity does not always confirm that demand exists for a specific product type, at a specific price point, at a specific location, at a specific moment in the supply cycle.

The Ikeja corridor illustrates this precisely. The three commercial sectors that we analysed are at materially different points in their respective cycles. The hospitality market is balanced. Average daily rates across the corridor is around ₦124,103, while premium branded products are commanding as high as ₦512,238 a spread of over ₦388,000 that is entirely a function of product quality and operational execution, not location. Retail is stable with rents averaging ₦139,200 per SQM per annum, underpinned by institutional anchor tenants and airport-linked footfall. The office sector on the other hand is oversupplied.

The Phoenix

A developer entering this market on the strength of a macro demand narrative is making three simultaneous product bets without understanding the odds on any each of them at a granular level. Research at the core, should help you disaggregate market signals and recommend a development strategy that protects downside specific to your project.

Pre-acquisition supply analysis tells you whether you are filling a gap or adding to the problem.

Every development project enters an existing supply environment. The question pre-acquisition research answers is not whether a market is active, it is whether a proposed product is really filling a gap or just adding to the stock.

In our example, a developer entering the Ikeja market with an undifferentiated product, standard Grade office, conventional retail GLA, or a mid-market hotel is not filling a gap. Pre-acquisition supply analysis is the mechanism through which a developer can identify where the real gap is, the product type required to fill it, and at what quality threshold the market rewards differentiation. In cost sensitive environments like Nigeria, the assumption that a market will absorb whatever is built has destroyed more value than any other single factor.

Site limitations have financial implications that live with your project.

Two adjacent sites of identical area and headline price can carry materially different development envelopes depending on zoning, height restrictions, title quality, and access configuration. Each variable carries financial implications. In our example, the site located within an active airport area, falls under aviation authority obstacle limitation surface requirements. Those requirements constrain vertical development, which limits achievable gross floor area, which limits the asset's revenue-generating capacity, which directly impacts the price that should be paid on the land. Active flight operations introduce noise and air quality considerations that affect room specification, construction cost, and achievable rates for any hospitality component, variables that compound meaningfully at scale.

The site also presents a rectangular configuration with approximately 25.3 metres of frontage and no secondary rear access. That configuration has direct implications for loading, servicing, parking, and pedestrian flow, all of which affect the attractiveness of a mixed-use project. None of these variables appears in the asking price. All of them are material to whether that cost can generate an acceptable return.

Research converts demand from assumption to bankable evidence.

Demand must be tested with the specificity required to give an investor, a lender, or a board sufficient confidence to commit capital. Pre-acquisition research, among other things, should help you figure out if there is a demand, where exactly it is coming from, and most importantly, curate off-takers for the project.

In our example, we helped the client develop an off-taker database of 415 active corporate occupiers across Lagos, spanning 12 sectors with named decision-maker contacts and in several cases, their credit ratings. The data identified where the majority of these firms are concentrated. That database converts the demand thesis from hypothetical into a named, contactable, credit-assessed pipeline of potential occupiers. 

Does the return justify the cost?

The cost of a rigorous pre-acquisition study is a fraction of the capital at risk in any large-scale transaction. Pre-acquisition research does four things that no other input can replicate at this stage: it validates whether the market supports the proposed use, at the proposed scale, at the proposed price point; it establishes an independent, data-backed acquisition range that anchors price negotiation; it identifies site-specific constraints that alter the development envelope and the financial model; and it produces the demand evidence necessary to support capital raising, operator engagement, and planning submissions.

Each of those outputs carries a quantifiable financial value. In most cases, it exceeds the cost of the research by an order of magnitude. The discipline of grounding the first decision in data does not eliminate risk. It ensures that the risks you carry are ones you have assessed, priced, and chosen, not ones that surface after capital has been deployed

If you are working on any project and need bespoke market research, contact our advisory team at advisory@fortrenandcompany.com.

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