Insight from CBRE/DLA Piper survey to help potential investors in African real estate bridge the gap between perception and reality
1. Real estate markets in parts of Africa have undergone considerable improvement in recent years, with growing economies, favourable demographics and increasing political stability attracting a range of investor types.
2. The quality of stock is improving, driven principally by international occupiers whose requirements and corporate governance are dictating that building design, materials and environmental considerations all comply with their global standards.
The quality of stock is improving, driven principally by international occupiers
3. Variability in market conditions, including supply, and in the prevalence of well-established financial and legal systems mean that rigorous due diligence is essential. The availability of viable and robust investment structures is a further consideration for prospective investors. Local experience and representation are vital in most markets.
4. Overreliance on natural resources, reluctance to diversify and the consequent volatility of local markets and currencies is having a detrimental short-term effect on the credibility and attractiveness of several oil dependent markets.
5. Size and maturity dictate the markets that offer most opportunity for investors, but there are other countries such as Ethiopia, Uganda, Tanzania and Côte D’Ivoire that are becoming more attractive investment destinations.
6. The steps needed to accelerate this process include greater legal and market transparency, as well as improved valuation and easier capital repatriation.
7. Real Estate valuation in Africa often confronts a range of unusual factors, including a shortage of comparables, rapid supply changes, currency volatility and price spikes at the upper end of the market. Process rigour to establish clean title is particularly vital.
Countries such as Ethiopia, Uganda, Tanzania and Côte D’Ivoire are becoming more attractive investment destinations
8. Capital repatriation and foreign exchange present challenges to investors, with regulatory restrictions in place in some countries. Advance planning and adherence to national and local regulations are essential. Above all investors will need to devise flexible long-term strategies for capital repatriation well ahead of deployment.
More information on the points above can be found in the DLA Piper/CBRE Real Estate Investment in Africa report.