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Property for Africa: How the future real estate boom can shape economic development on the continent

South Africa is home to 15 million sqm of office space, while the rest of Africa, including North and Sub-Saharan Africa, contains a mere six million sqm, according to a report by Jones Lang Salle. But this is set to change. Africa is witnessing a remarkable growth of its city economies, with a rate of urbanisation that in some areas is pushing 9% a year. The commercial real estate sector in Africa has been described as “poised for lift off” by expert analysts. But how will the continent capitalise on this sector to ensure that property markets foster economic growth and development?

It is to address this challenge that the Department of Construction Economics and Management at UCT has partnered with Nedbank Corporate and Investment Banking (NCIB), to form the UCT-Nedbank Urban Real Estate Research Unit under the directorship of Associate Professor Francois Viruly. The primary source of funding for the Unit is NCIB’s Property Finance business, which has committed R1 million per year to the Unit for the next four years. With this generous funding, the Unit will develop an interdisciplinary research platform to identify issues within and solutions to urban real estate investment, finance, economics and management problems in Africa.

“The success and long-term sustainability of African cities is a function of vibrant property markets,” explains Viruly. “It should be founded on an understanding of how these markets function and what they can be expected to deliver.”

“The Unit aims to develop a unique research alliance between UCT, industry and society at large to collaborate with public and private sector partners, thereby ensuring a community and industry aligned agenda. “This engaged research aims to ensure that the property sector is able to play its role in fostering the needs of investors and other stakeholders”, says Viruly. “There is a growing understanding that the performance of the built environment is not merely the outcome of economic growth, but has a critical role to play in creating the physical and social environment from which economies are able to prosper”.

According to Viruly, the risk of letting the African real estate sector boom take place without the accompanying research and understanding of the impacts of property development is huge.“A great example of this,” he says, “was the 2008 global financial crisis which clearly demonstrated the social risks of an unmanaged property boom.”

A core research team in the Department of Construction Economics and Management which includes Associate Professor Kathy Michell and Rob McGaffin, has already been active in this area. Research projects under way include an investigation into the challenge of developing high-density affordable housing in the inner-city of Cape Town; the role of property markets in post-conflict countries; and how to leverage technology in the commercial real estate sector.

On Nedbank Corporate and Investment Banking’s involvement in the Urban Real Estate Research Unit, Robin Lockhart-Ross (Managing Executive of NCIB Property Finance) explains: “Investment in and funding of property ventures and developments necessitate taking a long-term view that is properly informed. “The importance of high quality real estate research in investment and financing decisions cannot be understated. “Both our association with UCT and commitment to research are consistent with our aspiration to promote thought-leadership in the property industry”.

Nedbank’s interest in urban real estate economics extends beyond the pure property aspects. It includes the efficient functioning and sustainable financing of cities, which will fall within the scope of the research Unit. “In NCIB we have a division that provides banking facilities to metropoles and term funding of infrastructural programmes essential to the growth of the urban property sector”, Lockhart-Ross says.