Africa’s Real Estate Pearls in 2015

Africa’s real estate has skyrocketed over the years and its presently on a high that needs to be fully exploited to produce the much needed bang it duly deserves. Though Africa’s real estate assets could contribute only few drops of water in the ocean of the world’s real estate enclave, its still an emerging market that has been noticeably rising steadily amid the inadequacies. With an increased construction hive and rapid urbanization, the real estate industry in Africa is an emerging force whose day of reckoning is sooner rather than later.

Here are the five countries that have set the pace for Africa in 2015 in her quest for prominence in world’s real state hub. They are categorized in no particular order:

1. KENYA

This nation of long distance runners is arguably East Africa’s hottest real estate destination.

Currently, Kenya’s annual housing deficit is estimated at 300,000 units. It is without a shadow of a doubt that the property market in Kenya is strong, this is evident through the property prices in the country.
The desire for retail space in Nairobi, Kenya is quite high which makes it the 8th most expensive in Africa at US$ 48 per square metres per month. The real estate sector in the country grew by 2.6 per cent in the second quarter of 2014 according to the county’s statistics bureau.

According to reports, insecurity slowed down prices in Kenya’s high-end real-estate market in 2014. Kenya is rated the 8th largest economy in Africa.

2. EGYPT

The only North African country that made the list – Egypt is Africa’s third largest economy with Cairo, Alexandria and Giza as its major cities. Egypt is not Africa’s fastest growing economy – not even breaking the top 20 in Africa for the next five years. But its retail market is booming and looks to stay so in the near future. The drop in the retail sector during the Arab Spring hurt the growing sector back in 2013 through 2014.

The return to growth in 2015 begins with regaining lost production to match pre-Arab Spring numbers and then expanding at a rate that could surpass pre-Arab Spring projections. Cairo retail space accordingly is renting for $100/m2 per month with some insiders estimating that the price could rise in the short term as consumer spending grows and retail development slowly catches up to match the demand.

Office space rents for $35/m2 per month in Cairo, making it one of top 15 expensive cities. But the presence of a significant amount of office space and rather slowly re-emerging economy (especially if you exclude the retail sector) limits the upside for this sub-sector. The industrial and residential market are similarly in the same situation with pretty moderate prices compared to other major African cities.

3. Angola

This Southern African country made the list based on high demand replacing her counterparts, South Africa who have been plagued with a full dose of Xenophobic attacks lately.

Angola is Africa’s fifth largest economy with Luanda and Huambo as its major cities. Despite the recent construction of new properties across both cities, primarily Luanda, the country suffers from a lack of good quality office and residential space. Surveys reveals that the majority of the near 300,000 square meters of office space brought to the market during 2014 – 2015 was already pre-leased or sold before officially opening. Although oil prices have fallen, the oil sector remains the primary occupier of local real estate with no signs of letting up. Prices for office space, accordingly, are the highest in Africa at $150/m2 per month in Luanda (the 2nd highest in Africa is comparatively $65/ m2 less).

A growing industrial property market – largely associated with the oil sector – is fully occupied, particularly in the Luanda port area. Some space is available in Viana to the east of the city but with strict criteria for potential tenants (i.e., many potential tenants cannot get access to space). Officials are consequentially looking to boost warehouse space, especially as port activity increases in the near future.

The retail market, although in its infancy, also provides a high return on investment with prices at $120/m2 per month and a rapidly expanding middle class in Luanda.

The residential market may be the least attractive in the country, downward pressure on residential prices from falling oil prices still means that you pay more than 3x the price for a house compared to the 2nd most expensive market in Africa.
4. Mozambique

Like Angola, Mozambique is a Portuguese speaking country and the second entry from East Africa the other being Kenya.

Offshore natural gas and a growing middle class underscores the changing real estate landscape in Mozambique and the country’s global reputation. It is projected as the 2nd fastest growing economy in Africa over the next five years, only trailing Ethiopia. Maputo is its major city (and capital). Although rather small for a major African city (with less than 2 million people), real estate prices show little sign of dropping.

Office space rents for nearly $40/m2 per month. Demand rapidly increases as banks, telecoms, and diplomatic/aid agencies consume the limited amount of good quality properties. The arrival of oil and gas executives has effectively led to the conversion of high luxury houses into office space until property developers can satiate the sector’s appetite.

The Mozambican government’s plans to invest heavily in the country’s industry and manufacturing market is pushing up industrial real estate as companies rush in. Prices at the ports, particularly for warehouses, is one of Africa’s most expensive. But most estimates and talk coming from government officials suggest this sub-sector may not be anywhere near as attractive as the office space sub-sector as the government may fit a good amount of the bill which should create downward pressure on prices.

Retail, although in a similar infancy stage, has a greater upside as consumer spending skyrockets. Retail space rents for $40/m2 per month in Maputo, which makes it one of the ten most expensive African cities for such space. Beyond that, it is also a city that will rapidly see rising incomes post-gas production and export in the near term.
5. Nigeria

West Africa’s no 1 if not Africa – Nigeria is Africa’s largest economy with Lagos and Abuja as its major cities. You get mix reviews from developers in Lagos and Abuja on the effects of recent construction. Capital has been poured extensively into both cities. Yet the prices in both markets are consistently at two of the most expensive. Lagos office space rents for $85/m2 per month while the Abuja office space, despite being in a market nearly 1/4 the size of Lagos, still rents for US$72/m2 per month.

As Africa’s sixth fastest growing economy (according to IMF projections 2015-2019), Nigeria is likely the most attractive market for retail property. Private equity funds have been active in this space in Nigeria for several years but prices remain high. It is home to the 3rd and 4th most expensive market for retail space at $80/m2 and $72/m2 per month in Lagos and Abuja respectively. New construction was delayed a little prior to the election but has resumed to normalcy with prices not projected to significantly drop until late 2016, if not later, as population growth in Lagos remains one of fastest in Africa. Housing prices accordingly still sit at the top of the range, only ‘outpaced’ by the aforementioned Angola. An executive house with 4 bedrooms goes for $8,000 and $8,500 per month in Lagos and Abuja…again, in Angola, the same property costs about $25,000.

These are the five countries in Africa that offers the greatest real estate investments opportunities in the ongoing year.

Real estate is surely a good pointer for the growth of an economy. So if you are looking for a place to channel your real estate investments; if these countries don’t come to mind then you haven’t gotten started yet or your proposed investments are not real after all