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. “The pace of change in the world is accelerating, with a series of transitions, known as global megatrends, transforming the way 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 demographic 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 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 ten selected countries in sub-Saharan Africa (SSA). These country profiles provide insight into the local, regional and global influences on the real estate markets of individual countries, providing an illustration 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 shortfalls in residential property across the continent 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 behavior 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.
When considering the 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 political 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.
Pictured: Ilse French, Real Estate Leader for PwC Africa