In some ways, Africa is a real-estate investor’s dream. Statistics show that Around 58 million people will move to cities in sub-Saharan Africa in the current decade, according to a report by the United Nations. Nigeria is at the heart of this urbanization. The country’s economy, powered by a booming oil-and-gas industry, is expected to expand by over 6.6% in 2014—significantly above the average for the region. Lagos is predicted to reach a population of 20 million by 2020, up from just fewer than 8 million at the last census in 2006, which will make it one of the world’s biggest cities.
Aside from being Africa’s largest economy with an emerging middle class eager to shop in modern stores, it is attracting many of the world’s largest companies,these companies will need offices. The country has a shortage of all types of modern space, raising the likelihood that the market will favor landlords for years to come.
According to the McKinsey Global Institute, Africa’s consumer spending next year will be in the region of $1 trillion. With a middle class of over 300 million people looking to be served with new products, Africa’s fast moving consumer goods sector is promising. There is a huge and ever-growing opportunity for manufacturers and retailers of FMCGs like food, beverages, home care and personal care products. But speed is critical. Investors who can quickly step in and get a grip on the market will be the dominant players in the years to come.
Foreign players like Actis LLP have made use of this opportunity. The London-based private-equity firm has $1.7 billion invested in Africa. The Ikeja City Mall, one of its projects in Nigeria is a 307,000-square-foot mall in Lagos which cost $100 million and opened in 2011 and currently is occupied with tenants such as Africa’s largest food retailer Shoprite Holdings Ltd. Actis also has plans of spending about $100 million to develop the 194,000 square-foot Heritage Place office building in Lagos, which is set to open in 2015.
To aid and increase the possibility of foreign investment, the Federal Government is driving a number of reforms aimed at transforming the economy. These reforms cut across transport (rail, airports, road and ports) power, agriculture, pensions, the electoral system, civil service and the judiciary.The Central Bank of Nigeria’s (CBN) tight monetary stance has had a positive outcome in that inflation has now declined from 12 per cent in December 2012 to 8 per cent in September 2013. The current rate of 8 per cent for September is the lowest rate of inflation since early 2008.
It is hoped that by mid-2014 dividends from these initiatives will become tangible. For now, credit flow into real estate developments remains limited. The rSeal estate sector will benefit from the availability of competitively priced medium to long term funding and both investors and developers are poised to take advantage of this.