9 Things To Expect In African Real Estate Markets In 2017

By Dana Sanchez AFKI Original Published: January 9, 2017, 2:22 pm

Shopping is changing in Africa. Formal retail developers are learning from the failures of malls in developed markets like the U.S., and applying new models to old ideas. African micro enterprises and small businesses will have a greater demand for shared space and flexible office space in the future. New or existing African office developments will need to apply design principles used in innovation labs, incubation centers and flexible work spaces, a stakeholder said. Here are 9 things to expect in African real estate markets in 2017 and beyond.

Sources: Business DailyMoneywebENCABizcommunity, KPMG, World Economic Forum, Bizcommunity

Shoppers at a Game store at Garden City Mall in Nairobi. The $250M mall is backed real estate developer Actis in partnership with CDC and IFC.Photo: Salaton Njau/theeastafrican.co.ke.

South African developers continue looking north for business

South African commercial real estate developers will continue targeting Nairobi as a top destination for retail shopping centers and malls. Some analysts warn of an oversupply of shopping centers. Others say there’s still room.

Source: Business Daily

A road under construction in Mbouda, Cameroon. Mbouda is the continent’s fastest growing city at 7.8% annually, according to WEForum.org. Photo: nogheu2010.wordpress.com

Growth will come from mid-size cities, not megacities

Megacities as engines of global growth are misunderstood. The world’s 23 megacities with populations exceeding 10 million will contribute just 10 percent of global growth by 2027, according to a McKinsey Global Institute (MGI) report. Growth will come from mid-size cities with populations of between 150,000 and 10-million. Africa is home to seven megacities, according to KPMG: Cairo (Egypt), Accra (Ghana), Johannesburg-Pretoria (South Africa), Khartum (Sudan), Kinshasa-Brazzaville (Democratic Republic of the Congo and Republic of the Congo), Lagos (Nigeria) and Nairobi (Kenya). A new fragile cities data visualization identifies 528 African cities with populations over 250,000, WEF reported.

Source: Bizcommunity, KPMG, World Economic Forum.

Recession has major public and private developments on hold in Nigeria

About 80 percent of the lots are sold at

Eko Atlantic

In this 2013 photo, a caterpillar digs reclaimed land for Eko Atlantic, a planned multibillion dollar residential and business development in Lagos pegged as the first modern smart city in Africa to be built on reclaimed land from the Atlantic. Photo: Pius Utomi Ekpei/Getty

, hyped as the largest property development project in Africa, but construction has slowed to almost a standstill. Investors are waiting out Nigeria’s economic recession before starting construction, ENCA reported. Dubbed the “Dubai of Africa”, the so-called city within a city is being built on less than four square miles of sand dredged from the Atlantic Ocean off the coast of Lagos. Eventually the island is expected to have 500,000 residents when completed in the next 15 to 20 years. About 60 percent of major construction public and private construction projects are shut down in Nigeria right now, according to Dapo Abe, head of a Lagos engineering consulting firm.

Source: ENCA

Gautrain, Sandton-O.R. Tambo Airport

Access to transport will drive development

Johannesburg plans to extend the Gautrain, an 80-kilometer (50-mile) mass rapid transit railway system that links Johannesburg, Pretoria, Ekhuruleni and O. R. Tambo International Airport. The Gautrain Management Agency plans to extend the rail route by 150 km (93 miles) to Soweto, Mamelodi and west of Johannesburg. Construction could begin within five years and take up to 30 years to complete, ENCA reported. The extension is expected to have a similar impact on West Johannesburg as it had on Sandton and Rosebank, where large corporations opted to move, said Andrew Golding, CEO of the Pam Golding Property group. Easier access to the workplace, amenities and leisure activities are a priority for many home buyers, Golding said.

Source: Bizcommunity, ENCA

Nairobi’s 1.7M-square-feet Two Rivers Mall is set to open in February 2017 after several delays. Photo: businessmindsafrica.com

African mall developers are learning from U.S. failures, making shopping more ‘experiential’

There is still room for more shopping malls in Nairobi, especially in neighborhoods where residents need transport to visit retail centers, according to a Knight Frank report. But shopping is changing and the newness of formal retail in Africa means African developers can learn from failures in developed markets. “Among the new projects for Nairobi’s new malls there is a clear trend towards mixed-use, rather than pure retail, development as office, residential and leisure facilities have been incorporated into the schemes,” said the Knight Frank report. “Unlike shopping malls in the U.S., retail centers in (Kenya) have incorporated experiential marketing to attract millennial consumers who are seeking memorable experiences from their shopping, a factor that has been identified as one of the reasons for the demise of America’s malls … the future of retail fulfillment is no longer just about more stores or shopping centers…In Kenya’s case, the shopping malls are being developed as city hubs, where people can live, work, shop and play at the same time; thus appealing to consumers at a wider level.”

Source: Business Daily

South African commercial property for rent. Photo: SA Commercial Prop News

Commercial real estate vacancy rate expected to stay around 10%

Thanks to technological innovation, the face of workplaces is changing in South Africa. It’s “the slow-burning and very real transmutation of physical spaces into virtual sites of economic productivity as a result of technological innovation,” said Nadir Jeeva, CEO of Afri-Corp Properties International, a Port Elizabeth-based commercial real estate and facilities management company:

Since the great recession of 2008-2009, South Africa’s national vacancy rate has hovered between 9.8-to-10.6 percent, and is likely to be frozen at the same level or increase further unless South Africa’s economic growth prospects improve. Workplace flexibility, virtual working and telecommuting – as a result of technological innovation and shifts in organisational policies can put the national vacancy rate under further pressure in the distant future.

Source: Bizcommunity

Victoria Island, Lagos. Photo: The Nation

Owners ‘desperate’ to rent Nigerian condos and offices built for the rich

In the past, Nigeria’s burgeoning growth attracted property developers who rushed to build high-rise condos and modern office centers for Lagos executives. Expats and rich Nigerians flocked to Victoria Island and Ikoyi – two wealthy island neighborhoods separated from poorer Lagosians living on the mainland by an 11-kilometer (6.8-mile) bridge. Today many of those buildings have “to rent” signs spray-painted in red on exterior walls in a desperate bid to attract tenants. “Companies have reduced their activities and many expatriates have left,” said Ade Kunle, a real estate agent, according to ENCA.

Source: ENCA

Home for sale in Bishopscourt, Cape Town. Photo: Primelocation

Property values are going up in some locations

In 2016, home price inflation in the Western Cape rose by 10.35 percent. Adjusting for inflation, this translated into a real increase in house prices of 4.2 percent during the first nine months of the year, according to Andrew Golding, CEO of the Pam Golding Property group.

Source: Bizcommunity

She Leads Africa business incubation hub in South Africa Photo: sheleadsafrica.org

Landlords adapt to the sharing economy with a new model for rentable space

Commercial real estate in the future will borrow from centers with shared and communal resources — at least in terms of office space. South Africa’s commercial real estate will be affected more by the sharing economy in the future than by ultra-modern, sleek urban design with smart technologies, according to Nadir Jeeva, CEO of Afri-Corp Properties International, a commercial real estate and facilities management company. Micro enterprises and small businesses will have a greater demand for shared space and flexible office work space. Lease agreements will become more layered with arrangements for flexible space to meet peak demands or short-term special project needs. This requires a new model of design and rentable space. New or existing office developments will need to apply design principles of incubation centers, startup innovation labs and flexible work spaces. These spaces are productivity sites and are purpose-built for the sharing economy as they will create opportunities for people to interact and collaborate in creative ways.

Source: Bizcommunity


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