London, UK – Demand for high quality commercial and residential property continues to grow across Africa on the back of the continent’s sustained strong economic growth and rising wealth, according to Knight Frank’s newly released Africa Report 2013.
Africa is in the midst of a period of dynamic economic expansion, having averaged GDP growth of more than 5% per annum over the last decade. This strong growth is expected to continue and is creating wealthier populations, particularly in the largest and most rapidly growing urban centres. Africa’s “mega-cities” such as Lagos, Nairobi, Accra, Lusaka and Dar es Salaam are increasingly becoming the drivers of its economic growth and, as a result, are attracting growing interest from occupiers, developers and investors.
In the retail sector, the increasing wealth and sophistication of African consumers is leading to rising demand for modern retail formats and western-style shopping centres. Countries such as Zambia, Ghana, Kenya and Nigeria have seen a wave of retail construction activity in recent years which has delivered the first generation of modern shopping malls to many major cities. The construction of further, and larger, shopping centres can be expected, as developers seek to meet the demand for high quality retail space from increased numbers of international retailers entering Sub-Saharan markets and major South African chains pursuing expansion plans elsewhere in the continent.
In the office sector, many key African cities have severe shortages of high quality space built to the specifications expected by international companies. This scarcity of supply has led to extremely high rents in some cities, particularly where there is strong demand for office space from international occupiers from the oil and gas sector. Indeed, prime office rents in Luanda and Lagos are amongst the highest in the world. In Luanda, recent construction completions have eased some of the pressure on the market and rents have become more affordable over the last twelve months but, even so, at U$150 per sq m per month, prime rents remain well above the levels seen in leading global office markets such as London, New York and Hong Kong.
Oil companies and the banking sector are established sources of demand for office space in Africa, but it is also noteworthy that African economies are diversifying and non-traditional sectors are emerging. The growth of mobile technology in Africa has been a particularly prominent phenomenon over the last decade. Africa’s technology boom is generating new sources of office market demand and the continent is now home to a number of growing technology clusters, such as “Silicon Savannah” in Nairobi and “Silicon Lagoon” in Lagos.
In the residential sector, the need for greater volumes of good quality housing is reflected in a number of ambitious new suburbs that are either under construction or planned by private property developers on the outskirts of existing large cities. Examples include the Eko Atlantic scheme on Victoria Island in Lagos, Tatu City in Nairobi and La Cité du Fleuve in Kinshasa. While all of these projects remain at very early stages, they may herald a wave of new large-scale urban developments across Africa. The demand from offshore buyers for high quality residential accommodation has continued to increase in countries including Morocco, Kenya and South Africa.
Matthew Colbourne, associate, commercial research, said “Africa’s impressive economic progress is generating a growing need for the construction of good quality property in major cities across the continent. The rising wealth of Africa’s middle class is leading to demand for increasingly sophisticated retail formats and better quality residential property. Meanwhile, as overseas companies seek to expand into Africa’s growing markets, and as African-based companies grow themselves, there is a need for investment in the construction of high quality office buildings, which are currently in short supply in many African cities.”
Peter Welborn, head of Africa, commented “Property investors and developers looking for emerging market opportunities are increasing external investment in Africa, particularly as the growth markets of the last decade such as Asia-Pacific and Central & Eastern Europe mature and the level of returns they offer begins to diminish. Many African countries remain challenging places in which to do business, but for those able to steer their way through African property markets, there is the promise of high returns and significant growth potential. Knight Frank continues to help investors navigate the rapids in over 40 of the continent’s most challenging environments.”