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Monday, February 6, 2023

Why Real Estate Investors Should Pay Attention To Lagos Red, Blue Line Railway Completion

The first phases of the Lagos Blue Line and Red Line railway system are set to be completed by the 4th quarter of 2022, and be fully operational by the first quarter of 2023. 

This is as stated by Governor Babajide Sanwo-olu, Governor of Lagos State during a visit to both sites in August 2022.

The Red Line railway is a 37km rail route proposed to run from Agbado to Marina with twelve stations as well as a connection to the airport (MMIA International, MMIA Domestic). The first phase of the project is 27.5km long and will start at Agbado and terminate at Oyingbo. The following stations will be operational in this first phase: Oyingbo, Yaba, Mushin, Oshodi, Ikeja, Agege, Iju, and Agbado. The whole line is expected to carry 750,000 passengers per day at inception, however, the first phase has been estimated to carry up to 500,000 passengers daily.

The Blue Line Railway on the other hand is a 27km rail route that will have thirteen stations and run from Okokomaiko to Marina. The project’s first phase will be from Marina to Mile 2, while the second phase will terminate at Okokomaiko. The following stations will be operational in the first phase: Mile 2, Alaba, Iganmu, National Theater, Iddo, Ebute Ero, and Marina.

The Government’s recent commitment to ensure full operation of the proposed redline and blueline by January 2023 has resulted in renewed optimism for residents and we believe the same is for potential investors.

The Railway Projects and Specifications

The Lagos Rail Project called “Lagos Mass Transit” is an urban rail system sponsored and developed by the Lagos State Government through the Lagos Metropolitan Area Transport Authority (LAMATA). The main contractor of this project is the China Civil Engineering Construction Corporation (CCECC), who are also the main contractor of the Federal Railway; the Lagos-Ibadan Railway. 

The Lagos Mass Transit system not only includes the Blue Line and Red Line railway systems but has other railway routes across the State. These include the:

  • Purple line – Redemption Camp to Ojo
  • Green line – Marina to Lekki Free  Zone
  • Orange line – Ikeja to Agbowa
  • Yellow line – Otta to National Theater
  • Brown line – Mile 12 to Marina

According to the LAMATA, these lines and monorails will link the significant population and activity centers in the state, as well as take advantage, where possible, of existing transport corridors. 

Not only are the operations of these railway systems going to cause ease of flow in the road networks in the State, but we believe this is also going to increase real estate activities in the affected areas. Below we highlight the potential impact on the real estate sector. 

Commercial real estate activities are expected to increase in areas such as Agbado and Okokomaiko

Amongst the objectives of the railway construction stated by the Lagos Metropolitan Area Transport Authority (LAMATA), is to significantly contribute towards urban restructuring, shortening travel time, and improving city sustainability. This objective when achieved is bound to draw in commercial real estate development to the affected areas. 

Agbado area is one of the borders between Lagos State and Ogun State, and has relatively low house and land prices compared to other central places on Lagos mainland like Ikeja, Magodo, Surulere, and Yaba. Its location close to the outskirts of Lagos and far from major commercial hubs, has impacted its value. Okokomaiko is also an area close to the Lagos-Ogun State border. It is close to Agbara, which is a major industrial hub in Ogun State. We expect that the development and operation of the railway will gradually draw in commercial real estate activities, such as office and retail developments to these areas. 

Increased accessibility will result in rising demand for residential real estate and land

Accessibility to Marina in Lagos Island is instrumental to residential development, as residents who work on Lagos Island and live on the Mainland will potentially have reduced travel time. As such we expect to see increased residential development investments as access continues to grow. In addition, as the commercial real estate activities increase, the need for residential real estate will continue to increase, with people preferring to live near their workplace. As such, we expect the gradual increase in house prices in these areas.  

Similarly, we expect the same increase to occur with land prices. The average land price in the Agbado area is currently at NGN 17,000/sqm. This is lower than the Ijaiye area which is around NGN 32,000/sqm, and Egbeda which is around NGN 23,000/sqm. However, it is around the same price as the Ipaja area which is also NGN 17,000/sqm.

With the upcoming rails, we expect increased prices just like we saw in the Epe area (another border area between Lagos and Ogun State).

With the development of major infrastructure in Epe such as the Ibeju-Lekki – Epe Expressway and the development of the Lekki Free Zone area, land prices in the area have grown by more than 100% in the past 5 years. As such, we expect a similar situation  along areas affected by the railway. 

Source: Estateintel

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6th February 2023