There has been a rise in the request for compact living spaces nationwide due to the constrained buying power of potential purchasers and a growing inclination among millennials and first-time homebuyers.

The challenging economic conditions have posed difficulties for many Nigerians, exacerbated by the headline inflation escalating to 31.7 percent in February 2024 from 29.9 percent in January. This surge is attributed largely to the removal of oil subsidies and the devaluation of the naira. Consequently, luxurious and large-scale residences have exceeded the financial reach of salaried individuals and emerging adults in key urban centers.

It is gathered that larger units of three and four-bedroom apartments based on empirical market analysis have become a burden to their owners, as it’s usually the last units to be sold in most residential developments. The trend made it difficult for many property developers to offload units built for high- end of the markets, and necessitated a shift by investors toward smaller housing units such as studio, one and two- bedroom apartments in tier 1 cities like Lagos, Abuja, Port-Harcourt, Ibadan, FCT, Onitsha, Aba, Kaduna, Ilorin among others.

As a result of these developments, tenants are adjusting their financial plans by curbing expenditures related to leasing three or four-bedroom residences, which can reach high rates of N1.5 to N1.9 million in prime locations. Many Nigerians are now opting to downsize to more modest accommodations, typically priced around N500,000 to N700,000 for one or two-bedroom units or N900,000 to N1 million. This shift enables them to allocate resources for essentials such as food, education expenses, and clothing.

Based on a study conducted by Lagos real estate firm, MDS Properties, out of the 428 apartments examined in Victoria Island, 369 units were successfully sold despite an apparent slowdown in the market.

A further breakdown of the units sold, indicate that they comprised 38 per cent of one-bedroom apartments, 43 per cent of two-bedroom apartments and 19 per cent were three-bedroom apartments.

A one-bedroom apartment comes with a bedroom, living room, kitchen, and bathroom. In terms of size, such apartments range from about 400 square metres to 600 square metres with a price range from N20 million to N40 million, for outright buyers. The trend is now common in Lagos areas such as Maryland, Lekki, Victoria Island, Ikoyi, and other strategic locations.

However, experts say the increase in demand for such units is based on the need of the market, not that they are affordable housing, adding that investors want to recover investment cost, especially on land, labour and building materials.

They said young adults, including ‘Gen Zs’ and other young professionals are making studio apartments to gain more recognition because they don’t need much space in the city centres and environment, where they move to achieve their dreams.

President, International Real Estate Federation (FIABCI), Nigeria Chapter, Mr Gladstone Opara, who confirmed the development, attributed the trend to the economic reality, and rising rent, which is making people scale down their expenses. "There is an increase in the demand for two-bedroom flats. The reason is that families are downsizing and the majority of the elites are not with their families," Opara said.

He said ongoing developments are tailored towards one-bedrooms, and two-bedroom flats. "The number of singles and young professionals is increasing and you don’t expect them to live in three-bedroom or four-bedroom flats. They prefer one and two-bedroom apartments. In some cases, the rent for two and three-bedroom flats are the same. In some places, a three bedroom is as high as N6 million, while for a two- bedrooms is pegged at N5 million," he said.

Opara highlighted that numerous property developers are capitalizing on this demand by focusing on developing one-bedroom and two-bedroom apartments. He also mentioned that the insufficient supply has led to a rise in rental rates.

A member of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr. Adiat Adeshina, attributed the escalated demand to the prevailing market conditions and economic environment. He elaborated that individuals who have recently secured employment, those with smaller households, and newly married couples represent a significant portion of those seeking one and two-bedroom units.

Adeshina said: "The demand for smaller apartments is high in the city centre and outskirts of the city like Abuja. People are adjusting their budget as most people don’t have big families now. The high cost of rent now is forcing people to adjust their budget; those who cannot afford to pay for three bedrooms are cutting down to either one or two bedrooms. The few who demand for three or four-bedrooms are the category of people with large families."

Immediate past president, Real Estate Developers Association (REDAN), Dr Aliyu Wamakko, admitted that developers are concentrating on smaller units because the purchasing power of most Nigerians has been depleted due to poor economic situation, especially the impact of fuel subsidy removal.

He said the situation has caused low and middle-income earners to downgrade their accommodation space, explaining that those who were living in three- bedroom flats now opt for two-bedroom, while those living in a two-bedroom now go for one-bedroom apartments.

"The new trend is as a result of the inability of developers to recover investments in high-rise buildings of more than two-bedrooms, as it ties down their finances over a long period of time. Unfortunately, some of our developers borrow money from commercial banks or elsewhere, and there is nothing they can do regarding such because the interest rate will keep rising.

"The best way to get out of the situation is to embark on development within the price that middle-income earners can afford. If you take a census on how many people buy a house of N100 million and those who will buy a house of N15 to N20 million. The category of people who could buy a property between N15m to N20m will be more and that is why developers are concentrating on one and two- bedroom units," he explained.

According to him, most of the facilities that come with such developments are standard facilities provided by the developers because the government is not providing infrastructure. He added: "Common facilities like transformer, industrial borehole are provided because the government does not care about people living in satellite towns whereas if the level of infrastructure is improved in the satellite towns, it will reduce the population within the city centre and other areas,"

REDAN Chairman, South-West Zone, Dr Kunle Adeyemi, observed that the new trend was predicted five years ago in the real estate sector, saying, it did not come to them as a surprise.

He argued that before now, the methodology is that developers build to sell without consulting consumers. "We have now realised that real estate end- users are now conscious about space that works, and the majority prefers compact and smart homes because of the paradigm shift in the statistics of consumers.

"Previously, those that buy real estate products are within a certain age bracket but now, there has been a shift where young Nigerians of 20-year bracket consume real estate products and their mindset is for a functional space. They’re less concerned about big space, but smaller apartments such as studio apartments that are smart, and comfortable. These individuals cannot go for a three-bedroom apartment," he said.

Adeyemi, serving as both the Chief Executive Officer of Sterling Homes, underscored the significance of small unit developments as a prominent trend in Nigeria. This approach allows individuals to acquire real estate offerings that align with their current requirements. Moreover, as their families expand, they may opt for one or two-bedroom apartments to accommodate their evolving needs.

"We have noticed through statistics that people just want to have two or three children and a two-bedroom is always considered. Developers and builders have now changed from building to sell to first consider the needs of consumers and build to meet their needs. This is why we are not seeing big buildings such as three-, four- and five-bedroom apartments," Adeyemi said.