African continent is opening the property market in offices and warehouse sectors.
With a rising global focus to spur investment in green buildings, Africa is seeing demand for best-in-class space with ESG compliance yet, the number of green-certified developments remains low.
Affordability remains the key to unlocking Africa’s home potential. But rising lending rates are quickly becoming a stumbling block for house hunters in a market that has historically depended on access to cheap debt.
With the abating of COVID-19 restrictions, many businesses have made a full return to the office. This has helped lift occupancy levels in all the 29 African cities.
Markets like Egypt are also benefiting from normalization of global travel. Businesses that had previously exited Cairo due to the uncertainty surrounding business continuity in the wake of COVID-19 are returning. This has helped to lift occupancy levels to around 70 percent.
Elsewhere, Africa’s industrial sector continues to remain resilient with agriculture-linked activities, data centers, and logistics facilities underpinning demand. Various government initiatives designed to spur growth have bolstered the demand.
However, there remains a shortage of high-quality, internationally specified warehouse facilities to satisfy the growing level of requirements.
Africa’s office markets remain buoyant, with the demand for prime offices outpacing supply in several cities across the continent. This is despite the spiking inflation and repeated currency devaluations.
Most businesses have returned to the office full-time as the pandemic restrictions have been largely removed from around the continent.
Nigeria appears to have fully recovered from the pandemic, with occupancy levels for Grades A and B standing at close to 100 percent. Grade A offices continue to attract the highest demand, despite their low supply.
One of the reasons why rents have remained stable in the Lagos market is due to the declining pipeline of new projects. And with a limited number of new developments, upward pressure on lease rates is expected to persist.
ESG demand is centered on best-in-class space, with investors and occupiers zeroing in on schemes that satisfy their ESG criteria. This theme will continue to intensify, raising questions about the future of older, more secondary, and non-ESG-compliant stock.
Across the continent, housing demand is shifting away from city centres to the suburbs primarily due to affordability considerations. The shift in demand is further enhanced by the relative gain in indoor and outdoor space. Affordability is expected to come into even sharper focus with inflation continuing to edge upward and household incomes continuing to be eroded.