Construction World May 2015

PROPERTY

GLOBAL MEGATRENDS will drive African growth opportunities

Global megatrends, such as rapid urbanisation and demographic changes, will drive growth opportunities in the real estate industry across the African continent over the next five years.

shaping the ‘African opportunity’ for investors. PwC’s inaugural publication entitled Real Estate: Building the future of Africa considers the impact of global megatrends on the African continent. The aim of the report is to provide an assessment of the current state of the real estate industry across Africa and demonstrate how the megatrends will drive growth opportunities in key African markets. The report also considers the real estate market in 10 selected countries in sub-Sa- haran Africa (SSA). These country profiles provide insight into the local, regional and global influences on the real estate markets of individual countries, providing an illustra- tion of the effects of the trends being felt at a national level. The report shows that the opportunities across the African continent are significant and span every sector. In almost all markets the demand for high-quality retail, office and industrial space continues to outstrip supply as international and local occupiers respond to new economic opportunities. Huge short- falls in residential property across the conti- nent will give rise to private investment on a grand scale. Furthermore, a lack of local funding for infrastructure projects provides a platform for new private partnerships with the public sector. Shifting demographic trends and changes in consumer behaviour are also likely to create a huge demand for new and different real estate by 2020 and beyond. According to the report, we will also see the entry of more specialist investors into the market. Projected forecasts of 20% net annual returns from investing in shopping malls, office blocks or industrial complexes in countries across the continent continue to draw in new investors. Among the findings of PwC’s report, the following eight drivers for growth were identified: 1. Africa’s young population will drive the demand for real estate and different types of real estate. Across Africa there will be continued urbanisation, an expansion of current cities and the rise of new cities. 2. Industrialisation will continue across Africa and will be accompanied by a rapid growth in the retail sector. 3. The export of natural resources and agriculture will remain key sources of economic growth, but will expose certain countries to increased risk. 4. Infrastructure shortages will create opportunities for investment.

Ilse French, real estate leader for PwC Africa.

“The pace of change in the world is accelerating, with a series of transitions, known as global megatrends, transforming the way

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in which business and society operate,” says Ilse French, real estate leader for PwC Africa. “More and more, investors around the world are seeing the growth potential of Africa, in particular its substantial demo- graphic edge. Economic growth, improving political stability and ongoing investments in infrastructure are opening up previously inaccessible markets,” adds French. Two publications recently released by PwC consider the drivers for real estate growth in Africa and highlight existing and emerging trends in African real estate that are

PwC Global real estate leader, Kees Hage.

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5. The influence of government policy and legislation on the decision to invest will increase, while local partnerships will become increasingly important. 6. Continued advancement within pension fund, stock exchange and banking regimes will facilitate investment, and an increased range of investors will drive demand for real estate investment opportunities. 7. Technology will impact business and building practices, as well as consumer behaviour. 8. Sustainability will become entrenched When considering these drivers of growth it is also important to note that there are specific risk factors underlying the development of Africa. These include the impact of polit- ical instability and changing government policy; complex legal regimes; the volatility of local currencies; and the timeframe of investments and restrictions on possible exit strategies. Despite these risks, real estate investors and developers continue to see the African market as a huge opportunity. French says: “It would be easy to under- estimate the impact of global megatrends on Africa. After all, Africa’s real estate markets have traditionally lagged behind in building design and occupier requirements, with Africa’s most ambitious countries changing city design and building practices.

A new skyscraper being built in Nairobi, Kenya.

CONSTRUCTION WORLD MAY 2015