Africa’s prime real estate markets have posted mixed performances over the last two years, as divergence emerges between growth rates of commodity-exporting and commodity-importing economies in the continent, according to the Knight Frank Africa Report 2017
The Africa Report – which was launched at the just concluded East Africa Property Investment Summit (EAPI Summit) – showed that the majority of the 35 cities in 30 countries analyzed have recorded declines in prime rents across offices, retail, industrial and residential segments since 2015, with Luanda in Angola hit the most, while some cities such as South Africa’s Cape Town posted no change, indicating stability.
Nonetheless, a significant number of the cities featured in the report recorded prime rental growths over the two years, ranging from 5.5 to 37.5 per cent for Grade A offices, 3.8per cent to 108 per cent for retail space, 10 to 87.5per cent for industrial space and 3.6 to 66.7 per cent for prime residential properties.
According to Peter Welborn, Chairman of Knight Frank Africa, real estate demands stemming from oil companies and the associated services sector has eased in all the African oil-driven markets.
Conversely, in the retail sector, the demand across Africa, from the growing middle classes has continued to create a marked increase in activity particularly in the Francophone countries.
“With the increasing demand for the best commercial and residential accommodation coming from the growing Africa middle classes, there has been an increasing need for developers to raise the quality of the specification in all the new developments.”
According to data in the Africa Report 2017, Angola’s Luanda remains the most expensive prime office location across Africa despite a significant correction over the past two years.
Office rents in the city stand at US$80 per square metre per month, nearly halving from US$150/sqm/month in 2015.
Nigeria’s Lagos and N’Djamena in Chad have the next highest prime office rents at US$67/sqm/month and US$55/sqm/month respectively.
In prime retail space, Tunis (Tunisia) posted the strongest growth in rents over the past two years, increasing by 108 per cent to US$26/sqm/month from US$12.5/sqm/month in 2015.
Douala (Cameroon) follows with a 66 per cent growth to US$46.5/sqm/month in 2017. Retail rents fell the highest in Antananarivo (Madagascar) since 2015, declining by 57 per cent to US$15/sqm/month, followed by a 50 per cent drop to US$60/sqm/month in Luanda and 46.7 per cent decrease in Dar es Salaam (Tanzania) at US$16/sqm/month.
DRC’s Kinshasa posted the strongest growth in prime industrial rents over the two years, up 87.5% to US$15/sqm/month, while Luanda’s fell by 52.4 per cent to US$10/sqm/month over the same period.
Malawi’s Blantyre had the highest growth in prime residential rents across Africa, rising by 66.7 per cent to US$2,500 for a 4-bedroom executive house in a prime location, from US$1,500 two years earlier.
Tunis in Tunisia and Harare in Zimbabwe recorded the second highest growth at 33.3 per cent each to US$4,000 and US$2,000 per month respectively.
Nairobi’s best performance was noted in prime industrial space, where rents rose by 11.9 per cent over the last two years to US$4.7/sqm/month, while prime retail rents remained unchanged over the period at US$48/sqm/month.
However, the city saw prime office rents fall by a fifth since 2015 to US$16/sqm/month, as rent for a 4-bedroom executive house decreased by 13% to US$4,100/sqm/month over the two years.
“A lot of Grade A office space has come into the market over the last two years and we have seen a significant number of established companies taking advantage of this to trade up space. Industrial rents have risen as a result of a move by developers into the high-end logistics market, whilst the development of a large amount of retail space has meant a stagnation of rents in this sector,’’ said Ben Woodhams, Managing Director of Knight Frank Kenya
The report shows growing volume of capital is targeted at Sub-Saharan Africa real estate investment and development, with a series of new investment vehicles being launched in recent years.
South African funds are increasingly prominent as they seek to diversify from their domestic market, although a good deal of this interest has been diverted to opportunities in Eastern Europe.
The International Monetary Fund forecast strong 2016 economic growth in countries such as Tanzania, Ethiopia , Kenya, Rwanda, Senegal and Côte d’Ivoire – which are all well above the moderate 1.5 per cent forecast for Sub-Saharan Africa.
Knight Frank sees potential capital flow into all of these markets, although Rwanda may be limited by its relatively small size and Ethiopia by restrictions on international investment into some sectors.