The Africa rising story of the growing middle class, population growth and an undersupply of quality real estate has piqued the interest of investors, as seen in the strong capital inflows from the US and Asia.
But an outlier in terms of investments into the continent is Europe.
While most property players are bullish on Africa growth prospects – especially in markets where there is a dearth of property developments, European investors and institutions still have their reservations.
Head of capital markets at real estate company Jones Lang LaSalle Europe Benjamin Perez-Ellischewitz said the continent is still not mature enough for investors to place their bets yet.
“For a lot of investors and core traditional investors, there is still not enough knowledge about Africa. There are concerns about land ownership rights and legislation. European investors are still conservative,” Perez-Ellischewitz said at the Africa Property Investment Summit on Tuesday.
More risk takers from the US and Asia will grow their investments into the continent, at which European investors will subsequently follow at some point, he said.
Despite this, the continent is making for a compelling investment case. There is a shortage of quality retail centres, as shopping for many Africans is conducted at informal markets.
Quoting figures from the South African Council of Shopping Centres, Jeff Zidel, director of Romania-focused mall owner New Europe Property Investments (Nepi), said there are 2 085 shopping centres in Africa covering an area of 25 million square metres. Of the shopping centres, only 140 are outside South Africa.
“When looking at the continent, it is mind boggling. The opportunities out there are fantastic,” Zidel said.
Nepi does not invest into the continent but owns shopping centres in Romania and Poland. Its parent company Resilient Property Fund is firmly invested into the continent.
Resilient offers income-chasing investors exposure to the Nigerian retail market, through Resilient Africa, a joint venture with Shoprite Checkers. It increased its stake last year in Resilient Africa from 50.9% to 60.9%.
Resilient Africa’s first Nigerian shopping centre, Delta Mall in Warri was opened in April and Owerri Mall in Imo State has a roof wetting in October. The Benin City Mall and Asaba Mall in Nigeria, which are in the pipeline, are expected to be completed in 2016. Resilient Africa has also agreed to acquire sites in Abeokuta, Asaba and Port Harcourt. It is in the process of acquiring four more sites.
Zidel added: “What we like about Nigeria is that we have this enormous country, enormous population and limited shopping. One of the problems is that they are not attracting a number of international tenants and international tenants won’t come until there are shopping centres developed.”
International tenants would typically make their foray into the continent with a view of growing their exposure through many shopping centres and regions, he said.
Not only is Nigeria attractive in the eyes of investors but so are Ghana, Kenya, Angola, Mozambique and Zambia. These countries are not only seeing spending patterns warranting for more retail developments, but at a broader level, their economies are growing at a rapid pace, expected to record economic growth north of 5% in 2015. South Africa’s economy is expected to expand by 2%.
More funds tap into Africa
Over the past six years, more property companies investing into the continent have listed on the JSE. Delta International is one such fund, which has a property portfolio valued at more than US$230 million (R2.9 billion), with properties in Mozambique and Morocco.
Sesfikile Capital director Kundayi Munzara said the listing of funds focusing into Africa is driven by investors looking to diversify away from the rand, as these funds pay earnings in foreign currency to shareholders. The interest into these funds is not sustainable, Munzara adds.
“I don’t know if the capital markets are deep enough and secondly I think it is a response to an immediate opportunity,” he said.