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Real estate investors in West Africa shifting focus

WITH global and regional capital continuing to flow into West African real estate, investors are starting to diversify their funds across the region and move away from the previous Nigeria and Ghana bias.

Following from the first market correction seen in 20 years, crippling central bank debt and the pegging of the Naira, the reaction to Nigeria’s (in President Buhari’s words) ‘suddenly poor’ status has been fight or flight. Some, like Novare, Old Mutual, Johnson & Johnson and Pick ‘n Pay are sticking to their guns and continuing to make gains, while others, like Sun International, Tiger Brands and Truworths, choosing to take their business elsewhere.

‘The Nigerian real estate investment market is experiencing a unique combination of the first economic recession in 25 years, a rapidly devaluing currency and a retail and commercial development boom. This has led to an oversupply of prime real estate at a time when tenant demand has fallen to its lowest levels in over a decade.  Broll has been at the forefront in advising, leasing and marketing for a large proportion of international investors and developers. We are actively working with our clients to come up with innovative property leasing solutions by providing tenant concessions while ensuring the long-term financial viability of the asset,’ says Broll Nigeria CEO, Bolaji Edu.

‘While the present crisis may seem insurmountable, Nigeria’s experience is no more than the growing pains of developing economy as experienced in South America as well as Eastern Europe. Investors are still withholding from Nigeria as they wait for the storm to pass,’ argues Edu.

In the midst of Nigeria’s struggles, Ghana, is slowly gaining ground again. Along with the IMF’s approval on a further $116.2 million disbursement, there is a positive shift in the country due to improvements in power supply, exchange rates and a stabilisation in inflation. With a stable growth outlook, business views are at their most favourable levels in years.

‘Ghana had a tough 2 years spanning over 2014/15 and seems to have  reached the bottom of the cycle during the 1st semester of 2016. With the government having agreed a deal with the IMF in 2015, we’ve seen an improvement in government’s fiscal discipline, stabilisation of the cedi, availability of dollars and less frequent cuts in power supply. All eyes are now on the presidential elections in December 2016. The general mood of the people on the streets seem to be better than last year, which we can see in a rise in foot traffic and trading density at all our malls. A number of retailers are now coming back to request for new opportunities outside Accra and we’ve seen a significant rise in the leasing target of our retail development in Kumasi over the last quarter,’ says CEO of AttAfrica, Kevin Teeroovengadum.

Francophone nations are also gaining a place in the spotlight. While they have no doubt been developing at a rapid rate for some time, in these times, their relative stability is becoming a significant drawcard for investors in the West African region, who are starting to view West Africa more broadly than just the bright lights of Lagos. In particular, Cote d’Ivoire is currying some serious favour following their new title as ‘Africa’s fastest growing economy’, and a number of reforms which have resulted in impressive economic growth.

‘A return to political stability, sustained infrastructure investment and stable regional currency have made Côte d’Ivoire the darling of international investors and operators among Francophone West African countries,’ explains Ivan Cornet, managing partner of Latitude Five. ‘Senegal also continues to attract investment, with smaller, more focused pockets of growth in other countries in the region.

‘Many players are approaching these markets with a strong investment and development mandate. European or South African firms lead the pack, though we are noting growing interest from Ghanaian and Nigerian firms and investors. Cote d’Ivoire remains a frontier market, with opportunities across all asset classes as well as specific challenges: lack of transparency and low levels of local expertise are among these, but can be overcome by new entrants through in-depth knowledge of the local market,’ he adds.

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