The Africa Property Investment (API) Summit has been exploring and enhancing the African property landscape for the last decade, with their 10th consecutive conference kicking off on Wednesday, 2nd October and ending on Thursday, 3rd October 2019 at the Sandton Convention Centre.
Looking back over the past ten years, the API Summit has helped formalise Africa’s emerging real estate markets, facilitating new opportunities and gaining important insights as the continent has evolved. Moving forward into the next cycle of development, this year’s conference theme – Africa RE-Inspired – will highlight the journey of property development so far, and how future trends will impact this ever-changing market.
Commenting on the changing approach of developers to the continent, Paragon Architects Director, Henning Rasmuss says that the business model has changed significantly as investors and developers have come to better understand the challenges and opportunities in Africa.
“Initially, South African developers and property funds mostly went out into continental Africa to replicate the South African development models: from design prototypes - especially in retail centres - to the finance deal structure, to the income model via ‘known’ tenants. The aim was to make money in stable currencies by exporting our version of ‘business as usual’. This worked initially, and in a few countries, for a while,” he says.
“What has developed since is a keen appreciation that the South African way of doing things, while quite successful ‘back home’, is just one way of doing business. Over a very short period, fully blended development models have emerged in pockets, here and there. Broadly, smaller projects have been more successful than larger ones, and there has been a scaling-down of ambitions and expectations.”
Independent real estate advisor Kevin Teeroovengadum agrees that the copy and paste model doesn’t work in a number of countries in Africa. “It is a must that one takes a lot of time to understand the depth of the markets and how local nuances such as purchasing power of local people, and cultures can impact on what needs to be built.”
Today, the game has changed with new players coming to the market, building and catering to mass needs, while also solving critical shortages in housing, logistics, healthcare and student accommodation.
“The most notable examples are International Housing Solutions building mid-level income homes, then Improvon-Actis, Agility as well as ALP developing specialised warehouses. There are various new players focusing on creating portfolios through the rolling out of multiple convenience retail centres which are all proving to be successful models. In terms of the structures and vehicles used we are also seeing more funds and developers forming joint ventures and utilising the experience of local developers to deliver on better and more sustainable projects,” says Kfir Rusin, Managing Director for API Events, the host of the API Summit.
Several development pipelines have slowed down, leading to a healthier balancing of demand and supply dynamic and with strong underlying demographics underpinning market fundamentals remaining in place in many of the markets, Standard Bank’s Head of Real Estate Finance – Africa Regions Niyi Adeleye says that growth is inevitable.
“Although the precise timing of the growth is hard to predict, we can expect the next wave to be less short-term and opportunistic driven, instead there will be a more sustainable approach that creates products that really serve the markets and make sense in their context,” he says.
Adeleye notes that as some investors are pulling out, others are simultaneously entering the market. “In the current market, property aggregators are able to acquire assets and portfolios at very competitive prices. While investment levels on aggregate are currently in a holding pattern, there is now more longer term capital entering the market. Newer investors have evolved their models to include a longer investment horizon to create and ensure a greater level of sustainability in the sector and markets.”
New projects are expected to rise from the retail and industrial sectors, as well as data centres, private education and student housing.
“In pockets, ‘diaspora housing’ for middle-class African professionals still has its moment in the sun. Business hotels are also a likely sector for growth, but they depend on numbers of visitors and stable local economies, so it remains a fragile growth trajectory,” says Rasmuss.
Expect further discussion on these topics and more at this year’s API Summit, which will see participation from over 550 delegates, 60 speakers and 285 companies in attendance.
“The focus is shifting to developing assets which cater to Africa’s still-developing economies, needs and to the larger demographic. This year’s conference promises to inspire and provoke new ideas as we unpack and delve into the many lessons learnt over the last decade,” Rusin concludes.