Neighbourhood stores win as Nigerians ditch big retailers, Knight Frank report says

Nigerians are shifting daily shopping to neighbourhood stores instead of traditional large-format retail outlets, according to Knight Frank’s Africa Report 2026/27. The shift is driven by convenience, proximity and changing consumer behaviour under income pressure.

What the report says

The report said there is a clear shift towards convenience-led and hyper-local retail formats in Nigeria. Neighbourhood-focused brands are capturing daily essential spending within residential areas where consumer demand remains relatively resilient.

“There is a clear shift towards convenience-led and hyper-local retail formats.”

“Neighbourhood-focused brands, including Bokku Mart, are outperforming traditional large-format retail by capturing daily essential spending within residential catchments, where consumer demand remains most resilient,” the report read.

The report linked the trend to income constraints, mobility considerations and a preference for proximity. It said this is creating opportunities for neighbourhood-focused retailers, while traditional large-format retail faces a more selective consumer environment.

Retail rents and foreign interest

Prime retail rents in Nigeria currently average about US$25 per square metre per month, while retail yields stand at approximately 9.50%, according to the report.

The report also noted continued international interest in Nigeria’s retail market. It cited the entry of Sinomart International at Lekki Palms Mall as an example of foreign retailers targeting selected and cost-efficient retail opportunities.

Offices and housing

In the office market, the report said Lagos remains tenant-led, with prime office rents averaging about US$55 per square metre per month. Landlords are prioritising occupancy over headline rents by offering rent concessions, flexible lease structures and incentive packages to secure tenants.

Occupiers are becoming more selective, with demand focused on well-located and operationally efficient buildings. Decentralised submarkets such as Ikeja are gaining traction because of lower occupancy costs and improved accessibility.

In the residential market, tenants are prioritising affordability over location, resulting in migration towards peri-urban and more affordable areas. Demand is shifting towards smaller and more efficient housing types, including studio and one-bedroom apartments, as households respond to economic pressures.

Construction costs and the wider market

Nigeria’s construction costs rose by 20% between December 2025 and May 2026, adding to cost pressures across the real estate market. The finding was disclosed in a report by Fortren & Company.

The increase was attributed to rising building material and energy costs, as well as supply chain and freight disruptions linked to the escalating Iran-Israel conflict. Nigeria was among the affected markets due to its reliance on imported cement, steel and finishing materials, as well as diesel-powered construction activities.

Developers and contractors are adopting indexed pricing, renegotiating agreements, delaying projects or scaling back specifications as project costs rise. The report said rising construction costs are beginning to influence broader real estate pricing, with implications for rents, affordability and investment yields across major urban markets.

Nairametrics earlier reported that Nigeria’s real estate sector is entering a consolidation phase, according to the Real Estate 2026 Outlook report by Victor Ameh, Managing Director of Legendary Foreshore. That report said 2026 would mark a shift towards more disciplined development, with well-capitalised developers having an advantage as high financing and construction costs pressure weaker projects.

Nigeria’s estimated $15 billion real estate market has very low mortgage penetration, leaving many developments dependent on equity, short-term capital and informal funding structures.

For consumers and businesses, the report points to tighter affordability. With construction costs rising and mortgage access limited, rents and operating expenses are likely to remain under pressure even as retail demand moves closer to where people live.