As the global economy slows, there has been a focus on Africa as an investment destination. Global capital has looked to the continent’s commercial property in a bid to diversify risk and chase enhanced returns.
However, activity continues to be hampered by the limited availability of investment-grade stock, currency uncertainties, high inflation levels as well as a general opacity in the markets.
Africa’s real estate cycle has also ushered in a period of market stabilisation. This is forcing investors to take a longer-term approach to the market, with lower expectations towards rates of returns.
The commercial sector has seen the increased acquisition of owner-occupied assets, with the retail sector experiencing a “right sizing” across various markets. Investment activity in 2019 continued to rise, with a good example of the type of deals undertaken being Growth Point Investec’s (GIAP) acquisition of the Achimota retail centre in Accra and the Manda Hill Shopping Centre in Lusaka, Zambia, from AttAfrica.
This came after GIAP secured capital commitments of more than US$212m from large institutional and international investors in 2018. Africa Capital Alliance also sold its stakes in the 12,000 sq m Cornerstone Towers in Lagos to Everty.
An influx of international developers and funds has seen a greater segmentation of investor classes with a focus on specific sectors. This has led to an increased focus on investments in hospitality and affordable housing, as well as student housing.
Kasada Capital Management reached its first close on equity commitments of more than US$500m on its maiden hospitality fund. Grit Real Estate acquired Senegal’s Club Med for circa US$12.9m in its bid to diversify into hospitality, whilst Investec invested US$12.7m in Acorn Holdings for its first green bond, issued with a focus on student housing.
The nature of the listed real estate sector in the continent has continued to evolve. Currently Africa possesses only 1% of the global real estate market, with 90% of this in South Africa, comprising a total market capitalisation of US$30bn and approximately 46 dual-listed REITs and listed property companies.
The rest of the REITs markets in Sub-Saharan Africa continue to be in their nascent stages. However, the recent adoption of REIT legislation in Ghana and Uganda is set to contribute to the continued real estate market formalisation. A recent transaction has been the acquisition of the Stanlib Fahari I-REIT by ICEA Lion Asset Management in Kenya.
Tilda Mwai, Knight Frank research, Africa
