Rapid urbanisation and growing consumer wealth on the African continent is providing numerous opportunities for investors wanting to gain exposure to retail and office property developments north of South Africa.
According to Standard Bank Head Real Estate Finance, Gary Garrett, some of the key African countries that are realising opportunities for real estate investment include Nigeria, Ghana, Kenya, Angola, Mozambique, Zambia and Namibia.
Foreign investment in the natural resource sectors of these economies is acting as a catalyst for economic development, boosting demand for quality office, retail and residential property space, he said.
Garrett says while considerable opportunities exist in Africa, investors must remember that the continent is not a single, homogenous jurisdiction. Investors often make the mistake of thinking of Africa as a uniform landscape whereas it’s critical to identify the countries and sectors that offer the best opportunities and match them with their own expertise. In addition, investors also need to find the right local partners to help them navigate the risks and complexities of doing business on the continent.
The demand for quality property assets on the continent is especially evident in countries where natural resource discoveries have recently been made. This increase in wealth coupled with foreign companies establishing operations is driving this demand.
Although commodity prices have dropped, and in particular oil, resulting in economic growth forecasts being revised downwards in many jurisdictions, there is still demand for quality real estate assets due to the enormous undersupply. Rapid urbanisation in response to sustained population growth and economic growth is also boosting consumer spending in these countries, which is further driving demand for quality real estate assets.
Nigeria’s population of approximately 170 million people makes it one of the continent’s premier destinations for property developments. While retail and office property dominate much of the interest in Nigeria’s property sector, it is only a matter of time before interest in the country’s industrial property landscape begins to increase, despite the nation’s well-documented power and transport infrastructure constraints as well as the impact of a lower oil price.
Nigeria’s commercial hub of Lagos, which has a population of approximately 21 million, has just 54 000m² of high-end retail space in the form of the Palms and Ikeja shopping malls, while Abuja has a mere 33 388 m² for its almost 3 million people according Standard Bank estimates. Nigeria’s West African counterpart, Ghana, is beset with similar constraints with the capital city of Accra having just 20 000m² of quality retail space for a population of approximately 4 million people with probably another 12 000m² of smaller centres being operational.
From a property investment and finance perspective, the major opportunities in Ghana going forward will be in the retail sector. Ghana however faces additional challenges largely related to the regulatory environment. The Bank of Ghana introduced measures in February 2014 to curb the extension of foreign currency loans and also the charging of rent in foreign currency in an attempt to bolster the nation’s currency, the Cedi. Despite reversing these regulations later in 2014, the perceived risk of foreign currency lending remains relatively high. This highlights the fact that investors need to be aware that rapid changes in policy can materially affect the risk environment and their return on investments.
The Portuguese speaking countries of Angola and Mozambique are prime examples where local knowledge and expertise are paramount in unlocking the potential that exists in these economies.
The natural gas finds in the North of Mozambique will unlock infrastructure and property development over time. The discoveries are in remote areas where there is little to no infrastructure. That will provide natural demand for office, residential and retail space in outlying areas as well as the capital city of Maputo, where many foreign entities are setting up head offices.
It is obvious that African retail markets will continue to grow while the phenomenal growth of Africa’s technology sector – along with a mobile revolution will continue creating demand for office space along with multinational companies from the banking sector and companies related to the oil and gas industry.
Source: Estate Times