Despite the economic slowdown that some African countries are facing, international financing is still fueling real estate markets in Africa. However, real estate developers and equity funds are readjusting their investment strategies. These are, in fact, more and more targeted. For several years a new trend has appeared. Now, the real estate sector and related industries contribute significantly to the GDP of the African continent. This development should continue over the next few years.
The typology of financial investments
In sub-Saharan Africa, the majority of construction is financed through real estate funds. In 2016, the British company Actis created the “Actis africa real estate fund 3 (Area3)” fund in the amount of 500 million dollars.
This capital is to be used for real estate in sub-Saharan Africa. It is to be injected into the construction of residences, industrial premises and offices in large urban areas of sub-Saharan Africa. Actis is now positioned as one of the largest real estate funds for the Africa zone.
The Area3 fund brings together many contributors such as institutions focused on financing development from North America, Europe, Asia and also the African continent.
Area3’s objective is to meet a tiny fraction of the demand for quality real estate demanded by dynamic urban centers. Area3 stands out for its ability to identify secure real estate opportunities
The volume of capital for investment and real estate development is growing continuously. New investment vehicles have appeared in recent years.
Among the most active investors, funds launched by South Africans are becoming more and more important, especially in West Africa. This type of investor, like European, Arab or Chinese investors, favor the diversification of their portfolio. They are also looking to position themselves in a market where growth is still weak.
Besides West Africa, South African investors continue to invest in East and Central Africa. Indeed, these two regions present high yields.
Instead, investors from the Middle East are moving towards large-scale real estate projects.
All of these investments therefore constitute a real opportunity for players operating in the real estate sector. Indeed, the real estate market in sub-Saharan Africa is justified by the demographic growth associated with urbanization. The profile of the young African generations is increasingly urbanized. The latter thus pave the way for the development of the real estate sector.
Commercial real estate as an engine of growth
Until now, commercial real estate can be seen as the engine of growth in the real estate industry. It is a major focus of development activity. In fact, he helped bring about the concept of the mall. Indeed, it is more and more prevalent in the big cities of sub-Saharan Africa. Nairobi is now positioned as the city most favorable to the development of “Malls” projects, but also of residential projects.
The francophone region of West Africa is also concerned. Countries north of Nigeria are of increasing interest to investors. The launch of the French Carrefour hypermarket in Abidjan, Ivory Coast, heralds what the new trend will be.
Along with this demand, the largest cities in sub-Saharan Africa are facing a lack of modern storage space.
As part of urban development, large industrial parks are being built such as Tatu City, not far from Nairobi, which will eventually become a modern city of 70,000 inhabitants, at the cutting edge of technology. This extraordinary real estate project is financed by local and foreign investors. The total cost is estimated at $ 2.25 billion and is expected to generate more than 220,000 jobs. It is a technology hub comprising residential spaces, shopping centers, retail outlets, recreation areas, etc.
The development of this type of real estate project will experience strong expansion over the next few years.
Real estate in the growing hotel sector
The shortage of rooms, a problem facing the hotel sector, is benefiting real estate and, in particular, hotel construction. This is experiencing strong growth in sub-Saharan Africa.
This expansion can be explained by various factors: dynamic demographic growth, structural deficit in the supply of rooms, increasing tourism in certain regions. In 2017, the construction of hotel establishments amounted to 1.7 billion dollars, with a forecast of 1.9 billion for the year 2018. The financing of these real estate constructions comes from investments.
East Africa is the region that experienced the most significant development in terms of hotel infrastructure in 2016. The city of Kigali has been chosen as the headquarters of the subsidiary of the Marriott International hotel chain, which plans to build 5 new hotels in South Africa. The amount of the investment is around $ 218 million.
Technologies and trends that will allow Africa to reclaim the real estate market
The African real estate sector is facing profound changes due to different underlying trends linked to new technologies and changes in consumption patterns.
Africa, to regain ownership of the real estate market, must harness new technologies to assert itself. These may, for example, be those related to augmented reality which makes it possible to offer customers an immersive experience or to automate the buyer’s journey from his research to the purchase offer that is made. online.
African real estate is still looking for its new business model. During the next few years, the real estate sector must continue to grow, and this, exponentially.