LAGOS, Nigeria (VOICE OF NAIJA)-According to a report by Estate Intel, Nigeria has garnered $600 million in real estate investments over the past 13 years.
The report, titled “African Real Estate Capital Trends Report 2024” noted that this surge is part of a broader trend across Africa, where up to $30 billion in transactions have been recorded in the past two decades.
“Key cities in South Africa, Nigeria, Egypt, and Mauritius have led the charge. The overall attraction is underpinned by their robust property markets, popularity as Africa’s business hubs consequently attracting investment, and specifically South Africa’s robust capital markets supporting its investments. Even post-COVID, these countries still dominate Africa’s real estate market.
“In contrast, there are a few stand-out countries that have attracted large amounts of institutional capital with a relatively smaller economy. These include Mauritius, Mozambique, and Senegal, all of whom have been very popular with the better-performing hospitality and industrial sectors,” the report stated.
The report highlighted that despite Africa’s reputation as one of the world’s most diverse regions, the economies of the ten largest countries out of its 54 nations collectively contributed 71% to the continent’s GDP.
“54 per cent of the population and 98 per cent of all investment activity are currently being tracked,” It stated.
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Addressing the Environmental, Social, and Governance (ESG) agenda, Research Director at Estate Intel, Dolapo Omidire emphasised the growing influence of ESG factors in shaping the landscape of real estate capital across Africa.
He said: “We have seen the provision of green and ESG-linked financing for real estate transactions grow by an annual average of 41 per cent since 2018, bringing us to a cumulative total of US $4.2b in mid-2024.
“With over US $1.3b announced year to date, 2024 has seen record-breaking green and ESG-linked property financing activity. Estate Intel is forecasting that this will cross the $2b mark before the year runs out as ESG themes become increasingly popular among institutional investors.’’
The Estate Intel research director pointed out that amidst challenges related to exiting investments, debt repayment was being utilized as a substitute for acquisition strategies.
“We typically wait for at least three events to call a trend. But in the two interesting examples we highlighted, debt payment is used to help close a sale where a standard sale failed and was too good to ignore. The case studies in question are in Nigeria and the retail sector linked, with one of the examples being Gruppo’s plan to settle a $25m senior debt using Ikeja City Mall sale proceeds.
“Precisely, the firm announced plans to dispose of its 75 per cent interest at Ikeja City Mall to Actis through its NREIF fund in November 2020. As such, Actis will own 50 per cent of the resultant shares and shareholder loans in it, and advance a shareholder loan to Gruppo for an aggregate consideration amount worth US $25m, which Gruppo intends to use in settling its senior bank debt,” he explained.
Omidire emphasized that institutional investors showed a notable preference for the hospitality sector.
He highlighted historical trends indicating robust institutional interest across hospitality, retail, and office sectors, with an average annual growth rate of 23% in the market overall.
“The hospitality sector, in particular, has recorded the highest deal volumes and value worth over $2.5bn (exclusive of South Africa), with the post-COVID-19 period realising the highest activity. This is on the back of tourism resurgence and increased investor interest in smaller and Francophone countries, such as Senegal and Côte d’Ivoire.“
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“Transaction yields on average have remained relatively stable at 8.7 per cent since 2014. Notably, the hospitality and industrial markets registered yields lower than the market average at 7.5 per cent and 8.1 per cent, respectively, citing attractive transactions to investors. On the other hand, the retail and office transactions recorded yields averaging 9.3 per cent.
According to Estate Intel data, transactions totaling up to $30 billion have been conducted across Africa in the last two decades.
“Key cities in South Africa, Nigeria, and Egypt have led the charge, with the overall attraction underpinned by their robust property markets, popularity as Africa’s business hubs consequently attracting investment, and specifically South Africa’s robust capital markets supporting its investments,” it indicated.