In recent years, the concept of service apartments has rapidly gained traction in the global real estate market. This shift is particularly pronounced in cities like Lagos, Nigeria, where demand for alternative accommodation options has surged. As business travel, tourism, and urbanization continue to grow, service apartments—also known as shortlet apartments—are emerging as a lucrative investment opportunity for savvy real estate investors. Platforms like Airbnb have further expanded the reach of these apartments, making them accessible to a broader audience of travelers seeking flexible, cost-effective, and homely accommodation.
In this blog, we will explore the world of service apartment investment, examining its future benefits and how it ties into the broader real estate investment landscape. We’ll also take a closer look at key locations such as Lagos, Lekki Phase One, and Ikeja GRA, where service apartments are becoming increasingly popular.
What is a Service Apartment?
A service apartment is a fully furnished apartment available for both short-term and long-term stays. Unlike traditional hotels, service apartments provide amenities such as kitchen facilities, living rooms, and laundry options, allowing guests to experience the convenience and comfort of a “home away from home.” These apartments typically come with housekeeping services, Wi-Fi, and utilities, making them a preferred option for travelers who want more space and independence than a hotel room can offer.
Platforms like Airbnb have helped to popularize the shortlet apartment model, enabling property owners to rent out their service apartments to travelers. This flexibility makes service apartments ideal for both vacationers and business travelers looking for temporary accommodation in major cities like Lagos.
Why Invest in Service Apartments?
1. High Return on Investment (ROI)
One of the most attractive aspects of investing in service apartments is the potential for high returns. Unlike traditional residential rentals, service apartments can command premium rates, especially when rented out on a short-term basis. For instance, a shortlet apartment in Lekki Phase One can generate more income per night compared to long-term residential leases.
Lagos, being the commercial hub of Nigeria, attracts a constant flow of expatriates, tourists, and business travelers. These individuals are often willing to pay higher prices for the convenience, flexibility, and comfort that a service apartment provides. For investors, this translates into a higher ROI than traditional rental properties.
2. Flexibility in Rental Options
Service apartments offer flexibility in terms of rental options. Investors can choose to rent their property out on a short-term basis through platforms like Fesyhomes Airbnb or Spacerenta, allowing for higher turnover and potentially higher rental income. On the other hand, if long-term stability is desired, service apartments can also be rented for extended stays, catering to professionals or families in need of temporary housing.
For example, an Ikeja GRA Apartment can be rented out to business travelers visiting Lagos for work assignments, while a shortlet apartment in Lekki Phase One might attract tourists or families visiting the city for a short holiday. This flexibility allows investors to adapt their rental strategy to market conditions and demand.
3. Increased Demand for Alternative Accommodation
The shift in travelers’ preferences towards more personalized and flexible accommodation options has fueled the demand for shortlet apartments and service apartments. Hotels, while still popular, can be expensive and often lack the homey atmosphere that many travelers now seek. Business professionals on long-term assignments, for instance, may prefer the privacy, extra space, and kitchen facilities that come with a service apartment.
In Lagos, areas like Lekki Phase One and Ikeja GRA are seeing a boom in the demand for shortlet and service apartments due to their proximity to key business districts, shopping centers, and entertainment hubs. For investors, this translates into a reliable and growing market.
Key Locations for Service Apartment Investment in Lagos, Nigeria
1. Lekki Phase One
Lekki Phase One is one of the most sought-after locations for shortlet apartments in Lagos. Known for its upscale residential and commercial developments, Lekki is a prime location for expatriates, corporate travelers, and tourists. The area boasts proximity to the Lekki Free Trade Zone, major business hubs, and popular leisure destinations such as the Lekki Conservation Centre and numerous high-end restaurants and malls.
Investing in a shortlet apartment in Lekki Phase One offers investors the opportunity to tap into the lucrative short-term rental market. With the continuous influx of travelers into Lagos, demand for high-quality accommodation in this area remains strong.
2. Ikeja GRA
Ikeja GRA (Government Reserved Area) is another prime location for service apartment investment in Lagos. As the commercial and administrative center of Lagos mainland, Ikeja GRA attracts business travelers, professionals, and expatriates who need temporary housing. The area is known for its serene environment, excellent infrastructure, and proximity to the Murtala Muhammed International Airport.
An Ikeja GRA apartment offers investors a steady flow of clients looking for comfortable, upscale accommodation. The area’s proximity to major corporate offices, government establishments, and the airport makes it a top choice for business travelers seeking convenient yet luxurious stays.
3. Victoria Island and Ikoyi
In addition to Lekki and Ikeja GRA, Victoria Island and Ikoyi are also high-potential areas for real estate investment in service apartments. These areas are home to many multinational companies, financial institutions, and embassies, attracting a large number of expatriates and corporate clients. Investing in shortlet apartments in these upscale neighborhoods can yield significant returns due to the high rental rates and demand from top-tier clients.
Future Benefits of Service Apartment Investment
1. Growing Tourism and Business Travel
Nigeria, particularly Lagos, is seeing a steady increase in tourism and business travel. With ongoing improvements in infrastructure, such as the expansion of airports and road networks, more travelers are flocking to Lagos for both business and leisure purposes. This trend is expected to continue in the coming years, which bodes well for the shortlet apartment market.
Additionally, the rise of global platforms like Airbnb makes it easier for property owners to reach potential clients, further boosting the demand for service apartments. As more travelers seek out alternative accommodations, investors in service apartments can expect a steady flow of guests and consistent rental income.
2. Capital Appreciation
In addition to rental income, service apartments in prime locations tend to appreciate significantly in value over time. Areas like Lekki Phase One, Ikeja GRA, and Victoria Island are seeing rapid urbanization and development, which in turn drives up property prices. Investors who purchase properties in these areas stand to benefit from both rental income and capital appreciation, making it a double win.
3. Tax Benefits and Incentives
In many cases, service apartment owners can benefit from tax incentives. For example, rental income from short-term leases may be subject to different tax rates compared to long-term residential rentals. Additionally, some investors may be eligible for tax deductions on property expenses such as maintenance, utilities, and furnishing costs, further boosting their overall returns.
4. Diversification of Investment Portfolio
Investing in a service apartment allows for diversification within the real estate investment sector. Traditional residential rentals often come with long-term commitments and lower rental rates. In contrast, service apartments offer investors the flexibility to diversify their rental strategy, balancing short-term and long-term leases based on market demand. This flexibility can help mitigate risks and ensure a steady stream of income, even during economic downturns.
5. Increased Property Value Through Upgrades
One of the key benefits of owning a service apartment is the ability to increase the property’s value through upgrades and improvements. Simple enhancements such as modern furnishings, updated appliances, or adding amenities like high-speed internet and smart home technology can increase the rental value of a shortlet apartment. This not only attracts more clients but also enhances the overall return on investment.
Conclusion
Investing in service apartments is becoming an increasingly attractive option for real estate investors, particularly in Lagos, Nigeria. With high demand for flexible, comfortable, and cost-effective accommodation from business travelers and tourists alike, service apartments offer investors the potential for significant returns. Areas like Lekki Phase One and Ikeja GRA are prime locations for shortlet apartments, providing investors with both rental income and capital appreciation.
As the real estate market in Lagos continues to grow and platforms like Airbnb expand their reach, the future of service apartment investment looks bright. For those looking to diversify their portfolio and tap into the lucrative short-term rental market, investing in service apartments is a smart move that promises both immediate and long-term benefits.