Why European Investors Are Wary Of Investing In Africa’s Real Estate

Written by Staff

Aug 26, 2015

The Africa rising story of the growing middle class, population growth and an undersupply of quality real estate has piqued the interest of investors, as seen in the strong capital inflows from the US and Asia.

But an outlier in terms of investments into the continent is Europe.

While most property players are bullish on Africa growth prospects – especially in markets where there is a dearth of property developments, European investors and institutions still have their reservations.

Head of capital markets at real estate company Jones Lang LaSalle Europe Benjamin Perez-Ellischewitz said the continent is still not mature enough for investors to place their bets yet.

“For a lot of investors and core traditional investors, there is still not enough knowledge about Africa. There are concerns about land ownership rights and legislation. European investors are still conservative,” Perez-Ellischewitz said at the Africa Property Summit on Tuesday.

More risk takers from the US and Asia will grow their investments into the continent, at which European investors will subsequently follow at some point, he said.

Despite this, the continent is making for a compelling investment case. There is a shortage of quality retail centres, as shopping for many Africans is conducted at informal markets.

Quoting figures from the South African Council of Shopping Centres, Jeff Zidel, director of Romania-focused mall owner New Europe Property Investments (Nepi), said there are 2 085 shopping centres in Africa covering an area of 25 million square metres. Of the shopping centres, only 140 are outside South Africa.

“When looking at the continent, it is mind boggling. The opportunities out there are fantastic,” Zidel said.

Nepi does not invest into the continent but owns shopping centres in Romania and Poland. Its parent company Resilient Property Fund is firmly invested into the continent.

Resilient offers income-chasing investors exposure to the Nigerian retail market, through Resilient Africa, a joint venture with Shoprite Checkers. It increased its stake last year in Resilient Africa from 50.9% to 60.9%.

Resilient Africa’s first Nigerian shopping centre, Delta Mall in Warri was opened in April and Owerri Mall in Imo State has a roof wetting in October.