Real estate investment in the Mid-East and Africa

Real estate investment volumes in the Mid-East and Africa (MEA) are at their lowest since 2022, but challenging macroeconomic conditions are creating buying opportunities in these regions. High financing costs, as well as uncertainty over valuations of property under sales and stringent prospects for real estate, might be a deterrent for some investors, but others see this lull in the market as a spur to action. Local investors are playing more of a role, but Diaspora capital is playing bigger roles in countries like Nigeria and Ghana. The region’s good climate and low property prices are added incentives. African and Mid-Eastern markets compare favourably well with other global property markets. Countries with high potentials are South Africa, Nigeria, Seychelles, Cape Verde, UAE, Egypt, Dubai, Doha, Riyadh and Mauritius.

Resilient cities in these regions include Cape Town, Lagos, Victoria, Praia, Dubai, Alexandria and Port Louis. Though the property markets are not as resilient as those of London, Manchester, New York, Toronto, Florida, Dallas, Berlin and Hong Kong, the cities are more resilient than some Asian and South American markets. Time Out Group, a leading global media and hospitality business, rated Lagos State as the nineteenth best city in the world to live by those who enjoy “night-out, buzzing neighbourhoods, affordable foods and drinks, and a mighty selection of things to do”. Cape Town in South Africa came second after New York and Dubai-UAE and Accra-Ghana came twenty-eight and forty-fourth respectively. The real estate sectors that will outperform in MEA regions include residential, commercial and hospitality and tourism.

The current markets in the regions are one of the most active globally and the outlook is enticing. Most of the cities mentioned above will see a northeast looking graph. There will be huge capital inflows in the region for the real estate sector, especially from America, China and Europe. The Canadian ban on some foreign nationals from buying properties in that country will help the property markets in the MEA regions. Cities like Cape Town, Lagos and Dubai and some others are relying on the advantage of having increased modern and Environmental and Social Governance (ESG)-compliant buildings. Energy-efficient buildings are now magnets in property markets because of their long term economy and vogue. This is a big competitive advantage in the property market of MEA cities.

The glaring issue in the real estate markets of these areas is that the boundary between real estate and infrastructure is blurring; most developers are now using infrastructure provision, especially energy-compliant infrastructure, motorable roads, blue infrastructure and smart technologies to market their buildings. Averagely, the countries in the Mid-East and Africa are not performing badly in the area of energy management in the built environment. The circular economy concept has not yet been adopted in the Mid-East and African cities but there is prospect in this area. The region is seeing high requests for lease of office properties. There is expectation that with the rate of property development in Dubai, Cape Town, Lagos and Port Louis due to high cost of building materials, there will be a supply gap in these cities in the near future.

Logistics, the part of supply-chain management that deals with the efficient flows of goods, services and related information from the point of origin to the point of consumption, continues to be buoyed in these cities by the reconfiguration of global supply chains. There is a huge prospect in the building materials supply chain in Africa and the Mid-East as there are few companies which are into the production of the required building materials. The governments of Africa are putting pressure on all sectors to cut their green gas emission and the logistics sector is witnessing great changes in the ESG arena, from solar panels on roofs to automatic sensor switches for lightning. There are signs that the Mid-East and Africa are also embracing the latest developments in sustainable buildings.

There are also increment-opportunities in the rents, yields, rate of return on investments, capital values and rate of appreciation of properties, and these will lead to property development opportunities in the areas. The financing capacities of property developments in the property markets in MEA is gloomy with little or nothing to write about. There is therefore a huge finance gap because of the inactive mortgage industry in the markets. There is a possibility that Nigeria, Ghana and Cape Town will make some improvements in their mortgage system. The retail sectors, which include all companies that sell goods and services to consumers, are waxing stronger and stronger. There are many different retail sales and store types in these markets. These are grocery, convenience, discounts, independents, department stores, Do-It-Yourself, electrical and specialty.

Specialty stores selling mono-products like electronics and clothes will see a surge in expansion. We are going to see a growth in interest from international investors in this sector. The outlook of residential real estate in MEA is radiant, especially build-and-sell, and there are many opportunities to make a good margin between market value and construction cost. Build-to-rent, service-apartments, industrial facilities and student housing have great potentials for investors. The alternative sectors like Home for Elderly or Senior Living, student accommodation, healthcare facilities, data centres, self storage, etc, are gradually developing in the regions.

The hospitality and tourism sector, including hotels and leisure facilities, is seeing great prospects despite the high inflation rates in some parts of the region. The Diaspora investors in property development in Nigeria and Ghana, and foreign investors in Cape Town, Cape Verde and Victoria (Seychelles), are those sustaining the property markets in these areas. Any property developer that wants to make ‘abnormal profit’ must be ready to adopt alternative building materials like steel columns and glass walls, metal walls, circular economy in construction and the use of timber structures. This is because over-dependence on cement, culminating in high cost of this product, is affecting the real estate development sector of countries like Nigeria and South Africa.

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