Africa’s real estate gross asset value only €113bn despite population size

Despite its large and growing population controlling about 15 percent of the world population, the gross asset value of real estate in Africa is only €113 billion or 1 percent of the world’s total value, analysts have disclosed.

The continent, they explained, is underweight in asset value of real estate relative to other continents, adding, however, that this state of affairs has made it an attractive prospect for investible funds in real estate.

Andrew Baum, a Cambridge University professor and thought leader on global real estate investments, who made this observation in his review of the global performance of Real Estate Investment Trusts (REITs) at a roundtable in Lagos, noted that domestic and foreign investors are more attracted to markets with properly structured REITs sectors and encouraged Nigeria to develop this asset class to harness the investment opportunity.

The roundtable with the theme ‘Catalysing the Growth of REITs’ was organised by Stanbic IBTC Capital in partnership with Actis and Resilient Africa for key industry stakeholders and regulators, including SEC, FIRS, NSE and PENCOM, to discuss REITs’ potential in improving investment in Nigeria’s real estate market.

Concerns have continued to mount over the dearth of long term funds for investment in the Nigerian market, hence this consideration for the growth and development of REITs as an investment instrument that could harness the opportunities that the market offers.

Niyi Adeleye, head, real estate finance (West Africa), Stanbic IBTC, pointed out that a well structured and sustainable rental cash-flow is the most important driver of the value and quality of REITs and other real estate investments as opposed to the over-weighted attention on project construction cost, property appearance and perceived building quality.

On a related note, Des de Beer, chairman of Resilient Africa, called for a drive to encourage corporations to release the stock of real estate assets in their portfolios for securitisation to increase efficiency in the market.

He also highlighted the need to increase the stock of investment grade real estate assets into the market, while Funke Okubadejo, director, real estate, Actis, noted that a liquid REITs market will boost further investment in institutional grade real estate as it will address the key need for viable exit route for developers.