African real estate creates new ways to attract business capital
August 3, 2017
The Africa Property Investment (API) Summit and Expo, to be held at the Sandton Convention Centre from 24 to 25 August 2017, will unpack and examine the latest in developments and potential opportunities for the African real estate sector.
Among the topics and trends that will come under the microscope at this event will be the African real estate market markets’ ability to attract capital from different investor types.
“This is largely linked to the improvement in the macroeconomic environment within a number of African countries, many of which are still largely commodities dependent,” says Klaus-Dieter Kaempfer, Absa Head of Commercial Property Finance for Africa.
“One important development within African real estate markets over the past decade has been the adoption, in some markets, of Real Estate Investment Trust (REIT) structures as vehicles to enable the participation of diverse investor types,” notes Kaempfer.
Boasting a young and growing consumer base, urbanisation in Africa is also expected to drive over 50% of Africans into cities by 2050, compared to 40% today.
“To many investors, this makes Africa the last frontier for growth,” adds Bronwyn Corbett, Grit Real Estate Income Group Chief Executive Officer.
“Listed property has always been regarded as a relatively low-risk investment. Given the see-through and longer-term predictability of earnings, the asset class provides investors with a much more stable earnings profile than other equity classes and its exposure to interest rates makes listed property a proxy for bonds,” she says.
While there are currently only four countries with REIT promulgation in Africa, this is expected to change. The JSE was the first to introduce real estate investment trusts (SA REITs) on the continent.
“Starting from a ZAR5 billion market capitalisation in 1998, the combined market capitalisation of listed property companies in South Africa today exceeds ZAR500 billion.”
“While sub-Saharan markets may still be opaque by global standards, this real estate in the region is slowly becoming more transparent,” says Thomas Mundy, JLL Sub-Saharan African Strategy and Research Head.
“According to the JLL Global Real Estate Transparency Index, three of the region’s markets were among the global top 10 improvers in the world last year in terms of real estate transparency. Botswana was in fact among the top five improvers globally with advances in the ‘Market Fundamentals’, ‘Governance of Listed Vehicles’ and ‘Regulatory and Legal’ sub-indices. Meanwhile, Zambia has entered the ‘Semi-Transparent’ category for the first time, while Ethiopia is also among the top 10 global improvers albeit from a very low base,” he says.
“In our view, as transparency and regulatory oversight improve, we do expect to see a deeper pool of domestic liquidity in sub-Saharan Africa. We remain very optimistic about the future of the REIT industry in this region to provide a conduit for the necessary capital,” he explains.
“Understanding and navigating the many opportunities and avenues for capital investment in real estate on the African continent is an important step in building future African cities. The property industry on the continent is growing and evolving, and the two-day summit will look at Africa’s biggest property development and investment successes whilst considering solutions to the challenges still plaguing the continent. It is through these discussions that we are able to unlock Africa’s true property potential,” adds Kfir Rusin, API Events Managing Director.