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Investment opportunities in Sub-Saharan Africa

Investment opportunities in Sub-Saharan Africa

Growth in real estate developments and investments in some Sub-Saharan Africa countries have slowed down due to low GDP growth rates in these markets.

GDP growth in Sub-Saharan Africa is expected to reach around 2.6% in 2017 on the back of a modest recovery in commodity prices, stable oil prices, positive economic interventions and political reforms and rebalancing of foreign exchange.  

“As a result, we are seeing investors and occupiers having to carefully look at balancing and mitigating risk when assessing new deals,” says Leonard Michau, Director and Head of Africa Operations for the Broll Property Group.

When these economies start growing, the real estate markets will also be ignited thus providing numerous investment opportunities for investors with a long-term strategy.

Michau notes that following a long period of sluggish activity in the office market in Nigeria, there are signs of a gradual uptick in demand with occupiers beginning to take advantage of increased competition in the A-grade office market. Some corporate occupiers in Nigeria have relocated from B-grade and standalone buildings as a result of more attractive rentals and incentives from landlords.

Estimated to measure around 18 million m² according to the South African Property Owners Association, the South Africa office sector is experiencing a degree of pressure as a result of current economic conditions. This is evident by a change in demand for space within certain nodes across the country as well as cautious attitudes being adopted by a number of corporates.

Prime gross achieved rents in major metropolitan areas average between R165-R200/m²/month (US$12.4-US$15.1/m²/month), with certain nodes achieving close to R250/m²/month (US$18.8/m²/month) in specific instances.

“Occupiers will increasingly take a more activist approach to portfolio optimisation in 2017 and beyond, and will pursue a focus on amenity-rich locations and buildings to retain talent.”

Michau says this is because of growth in the millennial cohort of the workforce, increased adoption of flexible and agile work patterns and a focus on general health and well-being in the workplace. 

Despite challenges facing the retail sector, retailers are set to continue with their expansion plans in 2017, albeit cautiously with many sticking to tried-and-tested profitable markets.

The industrial sector is uniquely positioned to benefit from structural changes such as online retailing that has forced a transformation of global supply chains and will continue to act as a significant engine for growth, he points out.

According to the CBRE Global Outlook Report, global online retailers require on average three times more space than traditional warehouse users.  For every $1 billion of new online retail sales, an additional 1 million sq. ft. of new distribution space is needed. Given current online retail growth forecasts, this translates to an annual average of 40 million sq. ft. of new warehouse demand between 2017 and 2020.

“Investment opportunities also exist in the hospitality and student housing accommodation sectors while growth in African cities will in turn spur growth in real estate markets and open up more opportunities for both investors and occupiers,” adds Michau


Broll Property Group

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