Africa's real estate markets entered 2026 in cautious recovery. Across the continent, the economic volatility of 2023 and 2024, driven by strengthening of the dollar against local currencies, sovereign debt stress, and post-pandemic fiscal tightening, had begun to ease. Growth forecasts from the IMF and World Bank were improving. Institutional investors were revisiting allocation conversations until the escalation of the Iran-Israel conflict interrupted that recovery.
Unlike other shocks that were primarily felt through exchange rates, the war is disrupting supply chains in the built sector resulting in increases in the cost of construction materials and energy that underpin both the delivery and operation of real estate assets across the continent. The extent of the impact of the war cannot be fully quantified yet, neither do we know when the war will end. Nonetheless, here are (just a few) of our thoughts on the direct consequences of the war on the market particularly from a transactions, construction and asset operations standpoint.
Before we dive in, here is some context on the war and why it matters for the African market.
On 13 June 2025, Israel launched a preemptive strike on Iran's nuclear facilities and military infrastructure, triggering sustained retaliatory exchanges and direct US military involvement that escalated through the first half of 2026. The strategic consequence relevant to African markets is the effective closure of the Strait of Hormuz — the passage through which approximately 20% of global oil trade and a significant share of containerised freight transits.
Although Africa has no direct role in the conflict, the closure of the Strait of Hormuz is feeding directly into African real estate costs. With roughly 70% of construction materials in Nigeria and many other African markets imported, the resulting disruption to global commodity supply chains, shipping costs, and refined petroleum prices has had an immediate and material impact on the cost of building and operating real estate across the continent.
Construction costs in Nigeria rose 20% between December 2025 and May 2026.
One of the direct impacts we are seeing is an increase in the cost of building materials. In the past five (5) months, construction costs have risen by 20% in countries like Nigeria. While the impact has not yet reached the severity of the 2023 foreign exchange shock, Nigeria's limited tolerance for supply-side disruption means the effects are already material. Ongoing projects are struggling to reach completion, and conceptual ones are taking longer to mobilise to site.
Although the volatility has introduced cost-overruns to the market, the more consequential threat is the return of unpredictability and weakening investor confidence. Faced with sustained price volatility, contractors across Nigerian and West African markets are abandoning fixed-price contracts in favour of phase-by-phase pricing arrangements. While this structure protects contractor margins, it transfers cost risk squarely to developers, many of whom operate financing structures with insufficient flexibility to absorb it.
Transaction activity across African markets has slowed, with multilateral institutions revising down growth forecasts for the region in response to the uncertainty.
In markets where dollar-denominated assets dominate the prime segment, the conflict has added a geopolitical risk premium that is translating directly into pricing and deal velocity. In Nigeria, the slowdown is worsening an existing purchasing power crisis that predates the conflict.
The 2023 fiscal reforms by the present administration, although necessary over the long term, triggered an immediate contraction in real household incomes that suppressed transaction velocity. On Victoria Island, Ikoyi, Oniru, Banana Island, and the Eko Atlantic axis, rents have risen 15% to 35% as landlords hedge against further naira depreciation. Majority of developments that were sold off-plan in Lagos over the past two years cannot be delivered at the price and specification at which they were sold.
Developers managing this transparently are attempting renegotiation. Others have gone silent, or are value-engineering specifications downward to close the cost gap. Both responses are impacting investor confidence in an already-low-trust environment.
Conflict-driven increase in energy costs is making real estate assets more expensive to operate.
Beyond construction and transactions, the crisis is also reshaping the economics of operating existing real estate assets. Diesel prices in Nigeria have risen from approximately N1,300 per litre at the start of 2024 to N1,950 per litre today. For commercial and mixed-use assets dependent on alternative power, the impact is material. Facility managers are reporting sustained margin compression, with service charge commitments in many assets failing to keep pace with actual operating costs. For occupiers, the effective cost of occupation is rising independently of headline rent, altering affordability calculations across office, retail, and residential assets.
What does the market require now?
Developers with live off-plan commitments
The combination of a 20% construction cost increase and the return of phase-by-phase contractor pricing has broken the economics of fixed-price off-plan commitments made before December 2025. Developers managing this position must open renegotiation conversations immediately, with full cost transparency. Silence and specification downgrades carry higher long-term reputational costs than a transparent but commercially difficult renegotiation. New project launches should be structured on indexed, milestone-based pricing from the outset. Fixed-price assumptions that no contractor can credibly honour are increasingly being phased out in the current environment.
Investors and capital allocators
In volatile times, stability wins. Existing stabilised assets with verifiable operating cost and income profiles carry materially lower risk and are increasingly being preferred by investors compared to new development commitments. Ongoing off-plan projects that are experiencing cost-over-runs require independent verification of the developer's cost-to-complete, financing headroom, and contractor arrangements before any further capital is committed. For investors underwriting new acquisitions, operating cost assumptions derived from 2024 data are no longer reliable. The N1,950 per litre diesel price, if sustained, structurally reprices the operating economics of any asset dependent on alternative power. We expect to see those prices reflected in entry pricing decisions.
Operators and facilities managers
Occupiers faced with revised service charge invoices without prior communication or cost explanation typically respond adversarially. That, however, is changing. Tenants are becoming more receptive to discussing ways to mitigate the impact of the increases in the short term. In the medium to long term, a more structural fix will be shared energy infrastructure and alternative fuel arrangements.
If you are looking for more definitive and structured guidance on what to do; how to stay ahead of the market as a developer, buyer or facility manager, reach out to our advisory team - advisory@fortrenandcompany.com.
We love your feedback and look forward to hearing from you! Join the conversation on LinkedIn and Instagram and let us know what you think about the impact of the war on the market or your business.
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