Last month, delegates from Africa and around the world attended the GRI Africa Summit in Rosebank, Johannesburg.
Fascinating talks were held to discuss opportunities, challenges and improvements for real estate in Africa.
One of the talks, chaired by JLL Sub-Saharan Africa’s Head of Capital Markets, Anthony Lewis, centred around whether foreign investors are still window shopping in Africa. The room was brim-full of investors and developers, many of who are currently doing business on the continent or who are looking to do so.
These were some of the interesting points that came out during the floor discussion.
- There has been a shift in capital raising from only small players to larger players in the market but some apprehension over risk and uncertaintyin Africa remains.
- Many of the Income Fund representatives felt that they would only invest in completed real estate assets, rather than development.
- There is a shortage of investment-grade stock in Sub-Saharan Africa.
- While there has been a definite change in perception from many South African investors, it remains to be seen whether this interest will turn into a traction of deals. Many South African investors still don’t take Africa seriously enough or look at available opportunities very selectively. One of the big reasons for this is that deals are mostly done in dollars, whereas South Africa trades in Rand.
- One of the big drivers to Sub-Saharan Africa has been the imbalance of supply and demand as well as the business infrastructure in place in each city.
- For third-party investors, some of the risk can be mitigated by working with local joint ventures that carry a lot of the risk. It also helps to gain experience and deep knowledge of the local market. Investors need to realise that this takes some time. Market knowledge and local presence are the key differentiators – investors need to know they aren’t investing in “Africa”, but in one of 54 countries on the continent.
- While there are 54 countries in Africa, there are only a few core markets in which capital is being deployed. These countries, and more specifically the cities, are maturing at different rates and each one needs to be seen separately.
- Investors in Sub-Saharan Africa will need to look at long-term commitments and debt until they start seeing satisfactory returns.
Investors should look at more diversity in Sub-Saharan Africa. While retail and office sectors have a large market share, over time further development will be necessary and broader investments of other real estate asset classes such as logistics.