Article originally appeared on Asset News Hub (22 August 2018)
Major trends that are likely to shape Africa’s property market in the future show the sector is getting smarter. It is responding to infrastructure and social challenges, and easing the ability to do business on the continent. These trends also reveal exciting opportunities for property investment across its multiple distinct markets.
For its 9th consecutive year, the Africa Property Investment (API) Summit & Expo, held at the Sandton Convention Centre on Thursday 20 and Friday 21 September 2018, will unpack and highlight some of the key trends affecting the continent’s real estate sector.
Providing access to the largest pool of real estate investors, developers and stakeholders on the continent, this year’s API Summit will provide the ideal setting for global players and local businesses to discuss a wide variety of industry trends, including:
Industrial Property
Due to a lack of professionally managed logistics infrastructure and inefficient supply chains across sub-Saharan Africa, logistics cost as a percentage of product retail costs is still very high at 30-40%. According to Toby Selman, CEO for Africa Logistics Properties, there is currently almost no grade-A warehousing on the continent.
“It tends to be the ugly duckling in the property sector as most investors flock to offices and retail first. And while most investors think the highest demand comes from multinationals, it is the fast-growing regional companies that tend to be the first movers, largely because they have higher local growth rates than the international companies. We see the main demand for our facilities from e-commerce, third-party logistics companies, product distributors and retailers,” he says.
Africa Logistics Properties believe they are helping to solve the logistics infrastructure challenge with their privately-financed distribution and industrial facilities for the rental market.
“We are disrupting the status quo with our modern logistics and distribution warehouses, offering businesses the chance to consolidate existing go-down based operations into a purpose-built grade-A facility at an affordable cost for the very first time.”
Affordable Housing
While governments can no longer afford to ignore the housing crisis, developers are coming to understand that low-cost housing can be a significant and lucrative market. Innovative financing structures backed by global institutional investors could also allow large-scale implementation.
But a pressing issue many African countries face is the lack of durable, low-cost housing with a minimum standard of infrastructure to prevent the spread of diseases.
“The target group for low-cost housing, in general, does not have enough equity or credit history to finance the purchase of even low-cost dwelling units. Without innovative financing solutions there can be no mass supply of low-cost dwelling units,” says Eckardt M.P. Dauck, Chairman for Zero Carbon Designs Ltd.
To address challenges around quality, Zero Carbon Designs has developed solutions that are based on a local value chain including raw-material sourcing, planning, manufacturing, and construction.
“Our processes ensure job creation and income within the country, while products are manufactured under strict quality controls. They are scalable, allowing for large numbers of housing units to be built, and they quick to construct, ensuring project finance costs are low, and they are also sustainable, environmentally friendly and carbon neutral,” he says.
Student Accommodation
Student accommodation is very much emerging in greater Africa, with the supply of student housing still low on the continent, South Africa being the exception.
Craig McMurray, Respublica CEO, says that while there are regional and nodal hotspots across all geographies, the African continent primarily sees domestic student demand and one where the highest need is an affordable product.
“This is in contrast to the more developed markets in Europe, UK, and Australia, which are primarily driven by international student demand and generally higher levels of affordability,” he says. Respublica started out eight years ago with their first facility of 300 beds and will be nearing 10,000 beds across the country by January next year.
“We believe that the demand for tertiary education will likely be driven by increasing urbanisation, higher living standards, mobility, as well as technological advancement in educational content delivery. This will have differing implications for the industry. However, I expect the demand trend to be upwardly steep but continually constrained by affordability at state, university and student levels,” notes McMurray.
Serviced Apartments
Serviced apartments in Africa represent less than 1% of all hotel rooms whereas internationally the figure is close to 9%. Currently, the highest concentration is in South Africa.
The Capital, which dominates the South African market, has combined serviced apartments with its regular hotel and conferencing to give their clients all the services of a hotel such as security, flexibility of stay length, room service, and a concierge at the same high standard expected in 4- and 5-star hotels.
“Due to historic undersupply, serviced apartments are increasing. Africa requires a secure and affordable alternative to regular hotels for consultants to stay for the many projects in Africa as the continent, unfortunately, imports a lot of skills internationally,” says Marc Wachsberger, Managing Director for The Capital.
While there is no shortage of long-stay accommodation available, not all experiences are equal. The Capital’s model, which has taken 10 years to develop, emphasizes operational skills to ensure that extended stay is positioned correctly in the market.
