Major global trends to drive growth opportunities in Africa’s real estate market
Major global trends such as rapid urbanisation and demographic changes are to drive growth opportunities in Africa’s real estate market over the next five years, a new PricewaterhouseCoopers (PwC) report has revealed.
The report also highlights industrialisation, technology and infrastructure gap as major growth drivers, acknowledging that existing and emerging trends shaping the ‘Africa’s opportunity’ for investors’ are quite significant and spans through the real estate value chain—residential and commercial inclusive.
Citing the growing demand for high-quality retail, office, industrial space and residential apartments in most African markets, the report predicts that as international and local occupiers respond to new economic opportunities, the need for private investment on a grand scale will certainly soar.
In addition, the lack of local funding for major infrastructure projects – a major limitation in Nigeria’s real estate sector – is also expected to create a platform for new private partnerships with the public sector in pushing the market to a new height.
According to the report, these prevailing opportunities may lure more specialist investors into the market, with analysts projecting about 20 percent net annual returns from investing in shopping malls, office blocks or industrial complexes in most countries across the continent.
“More and more, investors around the world are seeing the growth potential of Africa, particularly in its substantial demographic edge. Economic growth, improving political stability and ongoing investments in infrastructure are opening up previously inaccessible markets,” Ilse French, Real Estate Leader for PwC Africa, said in a statement accompanying the report.
French notes that with real estate investors around the world struggling to find value and returns at a time when core property is becoming overpriced in almost all markets; African markets such as Nigeria, is now of increasing interest and a major transformation in its real estate landscape is imminent.
Titled ‘Real Estate: Building the future of Africa’, the report identifies the expansion of current cities, rise of new cities, rapid growth in the retail sector and the urge by Africa’s ambitious countries to change city designs and building practices as other major future drivers of the sector.
For Kees Hage, PwC’s Global Real Estate Leader, there is a wall of capital targeting real estate opportunities in many markets across the globe, adding, “the search for better yields has taken some investors into development and secondary markets, moving them up the risk curve. But investors must strike a balance between the need to deploy capital and the ability to achieve good returns, at a time when there is such a difference in the economic conditions across the globe,” Hage enthused.
However, despite these huge opportunities, PwC also noted that there are specific risk factors underlying the development of Africa.
These include the impact of political instability and changing government policy; complex legal regimes; the volatility of local currencies; and the time frame of investments and restrictions on possible exit strategies. Despite these risks, real estate investors and developers continue to see the African market as a huge opportunity.
ODINAKA MBONU