The Sub-Saharan Africa Region enters a recession for the first time in over two decades this year as both international demand and domestic activity shrinks. For the year 2020, most African economies will have to accept the losses and work on fiscal and monetary interventions to recover from this year.
According to a study the international real estate outfit CBRE, the current situation is expected to affect various industry stakeholders in different ways in the short-term (6 months) as well as in the long-term (>12 months)
For developers, the short-term developers will bring a slowdown in construction and delays in site inspections. Some planned projects will be put on hold whilst the sector assesses the viability of long term recovery.
In addition, an emphasis on sanitizing multi-tenanted properties and other floor management services will be expected while changes in building plans and layouts for upcoming construction projects are inevitable.
Cost-wise, the firm says that developers should expect a hike in construction costs due to the slowdown in shipping activities i.e. import of building materials as well as weakening local currencies.
The long-term, however, is likely to bring brighter prospects for the first time in a long while with opportunities emerging for a development pipeline out of new markets due to favourable development land price models.
Technically, developers should future proof and enhance technology for future use.
CBRE says that in countries where political and economic uncertainty had been prevalent, most developments will likely be on hold for even longer periods and the construction sector may post some losses due to limited projects, leading to more job losses.
Developers will have to explore other aspects like short term space requirements from occupiers, stringent change management protocols for all tenants, and make plans for potential exposure shutdowns in the future.
Some developers will likely diversify into other real estate segments, including data centres and cold storage facilities which are gaining popularity gradually due to increasing demand.
In the short-term, investors/REITs are at a disadvantage as most will not be able to service their financial obligations. In this situation, landlords will endeavour to trade out of the deadlock with occupiers because it is to the disadvantage of the banks to liquidate.