Most investors have in recent years focused on the continent’s commercial property potential to diversify and achieve enhanced returns.
According to the Africa report, investment activity on the continent has shrunk on the back of high inflation, market uncertainties and opaque markets even as the global economy slows down.
However, other opportunities have cropped up in alternative sectors like affordable housing and logistics property.
“The real estate cycle in Africa has also ushered in a period of market stabilization that has forced investors to take a longer-term approach and lower their expectations regarding rates of returns,” says the report.
Africa currently accounts for only 1% of investments in the global real estate market, and 90% of this is in South Africa, comprising a total market capitalization of around US$30 billion along which has approximately 46 dual-listed REITs and listed property companies.
The commercial sector has seen an increased acquisition of owner-occupied assets, with the retail sector experiencing “right-sizing” across various markets.
The report states that Africa saw a marked increase in investment activity in 2019 with a number of acquisitions including Growth Point Investec’s (GIAP) acquisition of the Achimota retail centre in Accra and the Manda Hill Shopping Centre in Lusaka, Zambia from Attacq Africa.
The growth in the number of international developers and funds has led to increased segmentation among investors, with a dedicated focus on specific asset classes including hospitality and affordable housing sectors, as well as student housing.
Apart from South Africa, other REIT markets in sub-Saharan Africa are still at a nascent stage. The recent adoption of REITs legislation in Ghana and Uganda for example is, however, set to contribute to continued real estate market formalization in Africa.
Meanwhile, Kenya’s premier REIT, Stanlib Fahari I-REIT, is to be acquired by ICEA Lion Asset Management in Kenya.
Prime residential yields remain the highest in Tunis at 11 percent, while Addis Ababa recorded the lowest prime residential yields at 6 percent. The Africa report forecasts that Addis Ababa expects to receive 68,000 sqm of prime residential space in the next 2-3 years. Prime residential yields in Nairobi remain at 8 percent.