The sheer size of Sub-Saharan Africa and the wide range of market differentials and operating conditions present a challenge for prospective investors.
In its Emerging Beyond the Frontier report JLL identifies 10 cities that it believes will attract the majority of international capital flows and consequently development and investment activity.
Investors making their first acquisitions in Sub-Saharan Africa are targeting core locations and sectors (office and retail) in the commercial capitals that have scale and growth potential. Over time, as markets mature, JLL expects that these groups will broaden their search into secondary towns and cities, and alternative sectors such as logistics, healthcare, residential and student housing.
That said, established domestic developers and investor groups are already breaking ground in the peripheral nodes and growing secondary towns and cities where there is significant demand and a lack of supply of retail (particularly convenience centres), commercial and residential stock.
The established gateway to West Africa and the commercial capital of Sub-Saharan Africa’s largest economy, Lagos is undergoing significant transformation. Congestion and lack of high-quality office space in the mainland CBD is forcing business to migrate to Victoria Island and neighboring Ikoyi. This is driving real estate development. The construction foo Eko Atalntic City, a development of 10 million square meters on reclaimed land indicates the scale of potential growth and changing landscape.
Nairobi is the primary commercial and transport hub for East Africa and Sub-Saharan Africa’s most rapidly developing sub-region. As a result the real estate market is evolving swiftly. Decentralization from the CBD is driving the development of new commercial centers in Upper Hill and Westlands. A number of major mixed use developments are also under construction, including the 13 hectare Garden City – an integrated residential, retail and office development.
Nigeria’s capital is one of the fastest growing cities in the world with average GDP growth above 10 percent a year over the last decade. There are numerous large scale master planned schemes currently under construction that will dramatically change the face of the city over the next five years, including the Centenary City, a new smart city to be developed on 1000 hectares of land. The center of Abuja is being transformed by the development of the World Trade Center, a mixed-use eight tower complex that will feature 100,000 square meters of commercial accommodation as well as retail, hotels and luxury residential space.
Angola emerged in the early 2000s from the ashes of a 40 year civil war and has rapidly advanced to become the third largest economy in Sub-Saharan Africa, largely fuelled by oil revenue. The capital Luanda and the growing satellite city of Talatona bear testament to the speed and scale of the development of offices, apartments and residential compounds and shopping malls over the last 10 years. While the risk profile of Angola is significantly higher than other SSA markets, the opportunities and potential returns have attracted a number of significant regional developers as well as frontier investors and developers from South America and Europe.
5. Dar es Salaam, Tanzania
Economic growth averaging over 9 percent a year over the last 10 years is expected to grow further following the discovery of significant offshore reserves of LNG in Tanzania. Growing demand for higher-quality space for multi-national companies and diplomatic missions is leading to a shift away from the congested CBD towards new prime office markets which are being developed in the Gardens area and north of Salender Bridge.
6. Addis Ababa, Ethiopia
Ethiopia’s capital has a rapidly evolving commercial real estate market, with GDP growth expected to average above 8 percent a year over the next five years. Strong demand for modern office space is being driven by the oil sector and NGOs. The industrial sector has begun to attract international interest as the country emerges as a manufacturing hub thanks to the availability of government incentives.
7. Kigali, Rwanda
One of the world’s 10 fastest-expanding city economies and rising foreign direct investment volumes are boosting requirements for Grade A office space in Kigali, with occupancy levels of almost 100 percent in the CBD. Strong demand and the implementation of the Kigali Master Plan are leading to a redevelopment boom of office and retail space in the CBD.
Significant offshore gas discoveries that could make Mozambique the fourth largest exporter of national gas are boosting foreign direct investment (FDI) levels and the economic growth of Maputo. The industrial sector is also developing at a rapid pace with the national government investing heavily in the sector and planning the construction of large industrial hubs to serve Maputo and increase cross-border trade.
Strong economic growth and a 500 percent rise in foreign direct investment volumes over the past five years have resulted in increased demand for high-quality office stock in Lusaka. The city has a relatively well-developed real estate market but limited Grade A stock and development space within its CBD, and this has led to the emergence of several new peripheral and decentralized office locations.
10. Kampala, Uganda
A rapidly expanding middle class and increased consumer demand are propelling the growth of the city’s retail market and development of modern shopping malls. The fast rate of economic growth is also feeding through to an increase in speculative commercial developments in areas such as the Kampala Industrial Business Park.