In preparation for the Africa GRI discussion on “Pan-African Equity Markets”, the Global Real Estate Institute interviewed co-chairs Kevin Teeroovengadum of AttAfrica and Anthony Lewis of JLL SSA. The asked them about asset classes, international investors and institutional grade assets in the African market.
1. Which asset classes excite you most in Sub-Saharan Africa?
The industrial/logistics sector is once again my favourite for this year. As the manufacturing/retail sectors continue to grow healthily, it is becoming more obvious that there is growing demand for A-Grade industrial/logistics parks. We need more efficient logistics to ensure that FMCG and retailers can bring price down and for consumers to benefit. We will see international funders/developers who will start looking at this asset class, which might not be flashy enough, but can produce decent/sustainable returns for investors. There are good lessons learnt from the pioneering days of retail as an asset class in Africa than should be applied in the industrial/logistics sector. – Kevin Teeroovengadum, CEO, AttAfrica
2. Investors seem to be on the lookout for institutional grade assets and portfolio deals in the region. Do they exist?
We are starting to see more and more developers looking to develop Institutional grade assets in various countries. It will take another 4 to 5 years, before investors, who are looking to acquire those assets, will have the ability to transact. Right now in 2015, there are very few of these assets that are operational and ready to be sold. – Kevin Teeroovengadum, CEO, AttAfrica
3. Are international investors increasing their appetite and allocations to real estate investments in the region?
Interestingly, despite the fact that there are some serious headwinds in Africa (lower commodity prices, depreciation of local currencies vis a vis dollar, lower economic growth, security/terrorism risks, etC), we are seeing far more capital inflows to real estate in Africa than previous 5 years. Investors are coming from all corners of the world, USA, Europe, Asia, Russia and South Africa. There could be around US$1.5Bn to US$2Bn at play for the next couple of years. – Kevin Teeroovengadum, CEO, AttAfrica
Kevin is featured on the Africa GRI 2015 program by co-chairing a discussion on “PAN-AFRICA EQUITY MARKETS: are foreign investors still window shopping? And what are the most immediate opportunities?”
1. Which asset classes excite you most in Sub-Saharan Africa?
The industrial sector – particularly warehousing & distribution facilities – has been largely overshadowed by office and retail development in SSA, but now appears to be emerging as a seam of opportunity. Driven by the exponential growth in Africa’s global trade and more recently intra-Africa trade, we are aware of growing demand from international retail, pharmaceutical, FMCG and electronics groups that are grappling with the lack of suitable logistics facilities and supply chains for the distribution of their products across the continent. We are also seeing developers and logistics operators trying to respond to the opportunity. The challenge will be in delivering the product and solutions that are to some extent reliant upon improvements in key African ports and transport infrastructure. – Anthony Lewis, Director Sub-Saharan Capital Markets, JLL Sub-Saharan Africa
2. Investors seem to be on the lookout for institutional grade assets and portfolio deals in the region. Do they exist?
Despite the significant increase in development activity over the last decade, the SSA real estate investment market is embryonic by reference to global markets. We estimate the current stock of investment grade assets across Sub-Saharan Africa (excluding South Africa) to be in the region of USD6bn, with less than USD300m trading in 2014. So whilst SSA is currently a very small market in the global context, with low transaction volumes and pricing transparency, there is a large development pipeline under construction and we expect to see availability of investment grade stock increase significantly over the next 3-5 years. Over time we would also expect to see corporate owner-occupiers responding to increased liquidity and transparency in the real estate capital markets, resulting in more sale & leasebacks and portfolio sales. – Anthony Lewis, Director Sub-Saharan Capital Markets, JLL Sub-Saharan Africa– Anthony Lewis, Director Sub-Saharan Capital Markets, JLL Sub-Saharan Africa
3. Are international investors increasing their appetite and allocations to real estate investments in the region?
Anthony Lewis: Yes, the global hunt for yield is driving more international investors to seek investment opportunities in SSA markets. A number of the established regional development fund platforms appear to be succeeding in raising fresh capital, particularly from the America’s. Middle Eastern investors also appear to be increasing their exposure, albeit more through direct investments in large scale projects. The Chinese continue to focus on state-sponsored infrastructure development and resources, with relatively little investment in pure-play commercial real estate projects. South Africa remains the largest source of capital for real estate development in SSA, with many of the REITs on the JSE having significant allocations for dollar-denominated (rand-hedge) investment outside SA. However we understand that a large proportion of these allocations to SSA are yet to be deployed due to the challenge of identifying suitable opportunities that match the investment criteria of these funds. – Anthony Lewis, Director Sub-Saharan Capital Markets, JLL Sub-Saharan Africa– Anthony Lewis, Director Sub-Saharan Capital Markets, JLL Sub-Saharan Africa
Anthony is featured on the Africa GRI 2015 program by co-chairing a discussion on “PAN-AFRICA EQUITY MARKETS: are foreign investors still window shopping? And what are the most immediate opportunities?”
