Opportunity for investors as Africa’s real estate asset value low at 113bn Euros

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, hence the opportunity for investors on the continent.

The continent, analysts explain, is underweight in asset value of real estate relative to other continents, adding however, that this has made it an attractive prospect and destination for investible funds in real estate.

“Domestic and foreign investors are more attracted to markets with properly structured real estate investment trusts (REITs) sectors”, said Andrew Baum, a Cambridge University professor and thought leader on global real estate investments, who reviewed the global performance of REITs at a roundtable in Lagos, and encouraged Nigeria to develop this asset class to harness the investment opportunity.

The roundtable with the theme ‘Catalysing the Growth of REITs’ organized for key industry stakeholders and regulators to discuss REITs’ potential in improving investment in Nigeria’s real estate market raised concerns over the dearth of long term funds for investment in the Nigerian market, hence the 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) at Stanbic IBTC, pointed out that a well structured and sustainable rental cash-flow was 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.

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 at Actis, noted that a liquid REITs market would boost further investment in institutional grade real estate as it would also address the key need for viable exit route for developers.