Beyond Our Borders
With South Africa’s deflated appeal to foreign investors and its lagging economic progress, commercial opportunities are increasingly being explored in specialised real estate development and growth outside our borders.
Sub-Saharan Africa commodity and oil-exporting countries haven’t had it easy in recent years. From a real estate perspective, property prices came under pressure as rental levels fell, in some cases by 30 per cent or more.
Growthpoint Investec African Property Management MD Thomas Reilly now sees a different picture. “The overheated tenant markets with excessive rentals visible before the oil crash are no longer,” he says. “Instead, real estate markets have managed to re-base to more sustainable levels and, as a result, open up to a broader market. From a real estate pricing perspective, this potentially bodes well for new entrants.”
New entry points
Reilly believes entry points for new, long-term investors are compelling in markets such as Ghana and Nigeria. “Couple this with demographics. They include some of the world’s highest levels of urbanisation and middle-class growth, aside from absolute population growth,” he says. “Key opportunities prevail in retail, office and logistics/industrial sectors, where quality assets remain in short supply. We can secure strong international tenants and satisfy their local or regional presence.”
Growthpoint Investec African Properties recently secured prime retail assets in the Achimota Retail Centre in Accra, Ghana, and Manda Hill in Lusaka, Zambia. The company says Accra and Lusaka both display strong growth potential and opportunities to acquire strategic assets at much lower prices and more sustainable levels than in recent years.
Mauritius-based Grit Real Estate Income Group is invested in Ghana and Zambia too. With a market capitalisation of R5.25-billion, the group is also involved in Botswana, Kenya, Mauritius, Morocco, Mozambique and Senegal.
Grit targets corporate accommodation, hospitality, light industrial/logistics, corporate office and retail assets, underpinned by blue-chip international tenants. CEO Bronwyn Corbett says each African market is different. “In Ghana, we have a solid portfolio of corporate office assets, based on their growing economy and regional relevance. In Mozambique, we’re expanding our corporate accommodation offering on the back of strong demand from resource companies. In Kenya, we’re expanding logistics due to the shortage of suitable warehouses.”
Asked to flag promising sub-Saharan countries, Corbett says one of Grit’s key risk mitigants is to hold about 50 per cent of its portfolio in investment-grade Africa (Mauritius, Morocco, Botswana) and 50 per cent in higher-growth Africa (Mozambique, Ghana, Kenya and Zambia).
“We see Kenya logistics as a high-growth area. There are generations on the continent who have leapfrogged into the digital era, comfortable to transact on their mobile phones.
Companies such as Amazon are capitalising on this by creating large click-and-collect warehouses. This circumnavigation of legacy challenges in Africa, such as congestion and lack of formal addresses, is set to disrupt the sector,” says Corbett. She backs Mozambique as a stable source of income and growth, with demand for corporate accommodation and offices at an all-time high. “Grit is currently the largest landlord for A- and P-grade office space in Maputo.” One of Grit’s more recent 2019 property acquisitions was in Senegal. “Our expansion into Senegal was as a result of a sale and leaseback transaction with Club Med, the country’s largest tour operator with a 40-year track record in that country,” says Corbett. This underscores Grit’s investment approach of partnering with tenants to acquire and expand assets under long leases.
The company has also acquired an increased stake in Botswana Stock Exchange-listed Letlole La Rona, helping Grit increase its exposure to the Botswana property market with sufficient scale and corporate infrastructure. “It enables further exposure to investment-grade Africa, an increased weighting in the industrial sector, and a strong platform for asset management opportunities in an exciting, stable and growing region,” Corbett concludes.