Why Invest in Commercial Real Estate in Africa?
The results of the current global pandemic have had dire consequences across many local, national and international markets. According to the World Investment Report published in 2021, it’s interesting to note that in 2020, foreign direct investment (FDI) flows to Europe fell by 80% and to the USA by 42%. During the same period, Africa’s FDI flows fell by 16% to $40 billion – a level last seen 15 years ago.
Is it still profitable to invest in commercial real estate in Africa today?
Among the fastest-growing economies in the world are in Africa, including Ethiopia, Tanzania and Mozambique. The International Monetary Fund (IMF), and also according to the article by Dr Ayodele Odusola from the UNDP Regional Bureau for Africa, predicted that the continent would provide for the most growth prospects for the period 2018-2023. Thus, in terms of growth potential, the continent is a solid choice for property development.
With a young population, the relative improvement in discretionary expenditure per capita, ongoing urbanisation and the rapid adoption of technology, the need for retail centres, healthcare assets, data centres and commercial offices blocks is high, while labour is relatively cheap in comparison with European countries. With commercial real estate across most of Africa still in its infancy, the market is still wide open, offering above-average returns. In addition, many multinational companies want to expand their footprint to the continent. With quality multinational tenants to take up office and retail space, commercial real estate developers can look forward to reliable, USD-based, income-generating capacity.
In May 2019, Lux Afrique reported in an article that 70% of Foreign Direct Investment from China is directed to Africa. Accordingly, countries like India and Russia are following suit. With growing urban populations and an increase in higher-income earners, buying power also increases. There’s a growing demand for better quality products, housing, and offices. With such in mind, companies looking to establish a footprint on the continent, with the aim of gaining a solid return on their investment, will want to work with a development and construction firm that has extensive experience and track records in property developments across Africa.
For example, cities like Accra in Ghana and Nairobi in Kenya are high on the radar of a growing number of international firms seeking high-security, premium office space to establish their presence in these and other top cities on the continent. Because in many instances, diplomatic offices, telecommunication firms and banks often take up the bulk of premium office space, there’s a lack of available space for other multinational firms. Given that USD per square metre rent for such prime space is high due to limited supply, companies looking to invest in real estate on the continent can thus look forward to high and stable revenue from their properties.
To this end, partnering with GREA is the solution as the firm has a proven track record of successful projects across several countries. GREA also takes care in identifying opportunities, managing the projects, minimising costs and ensuring excellent ROI regarding anchor tenant income. The firm’s property portfolio and track record include projects in cities noted as commercial property development hotspots.