Eastern Africa and the Rest of the Continent Over the Last Three Years
Over the recent years, the below trends have emerged with regards to Eastern Africa and the rest of the continent:
Housing Demand and Affordable Housing
Eastern Africa has recorded significant growth and development in Africa with a fast-increasing population and rising middle class. According to ABiQ Business Intelligence Experts, the population of Eastern Africa is projected to increase by 25% to 445 million by 2030 compared to 445 million recorded in 2020. This has prompted a significant change in the housing market and real estate as a sector, with new trends emerging to reshape the nature of the sector and adapt to the new norms.
One of the major trends in the Eastern Africa region's real estate space is the increasing popularity of Affordable Housing. With a larger percentage of the region's population comprising of middle-income and lower-income groups still living in informal settlements and slums, there is a great need for low-cost and affordable social housing to provide safe and secure living conditions.
Both governments and private developers are quickly responding to this demand by investing in affordable housing and social housing projects. Governments encourage these projects through various incentives such as tax exemptions and provision of land at no cost as they race to accommodate the fast-growing population.
Besides the rising trend for affordable housing, there has also been significant growth of the middle class and high-income earners in Eastern Africa. There is a tendency for these groups to concentrate in areas of upmarket housing. As a result, demand for luxury housing units with high quality amenities and modern living spaces is rising. Developers are taking up the challenge and investing in high quality housing units like gated communities and luxury apartments.
ESG and Sustainability
As climate change and sustainability concerns receive more attention globally, interests and efforts toward sustainable and eco-friendly housing in Eastern Africa have gained more traction, with developers embracing innovative practices for sustainable development. The goal is to reduce carbon footprint through promotion of the use of renewable energy sources like solar power, as well as the incorporation of green building techniques and materials.
Many developers are racing to obtain green certifications such as EDGE for their projects. Moreover, investors are keen to consider climate and sustainability concerns as a basis for due diligence that informs their decision to invest in certain projects.
Technology
Technology has greatly changed the nature of operations in the real estate space in the way people trade and handle transactions due to the emergence of proptech. Proptech integrates digital solutions and innovation to transform and improve the real estate space by use of artificial intelligence (AI), virtual reality (VR), augmented reality (AR), and the internet of things (IoT) to provide solutions to the unique needs of the real estate industry, thereby enhancing efficiency, productivity, and scalability. Furthermore, clients are able to view projects virtually from anywhere using smartphones, PCs, and tablets through virtual tours.
Additionally, technology has improved living conditions and enhanced security in many housing projects by enabling incorporation of smart home technology that allows residents to control their lighting, heating, and security systems remotely using their smartphones or other devices. This can help to improve energy efficiency and make homes more secure.
Data Centers
Another growing trend in the real estate space globally is data centers, and Eastern Africa is not an outlier. Data centers provide more efficient and cheaper IT capabilities, hence their growing demand and popularity. Over the past few years, investment in data centers has increased, mainly attributable to growing demand for data and server infrastructure storage spaces as technology advances.
In East Africa, most data centers are currently owned by telecommunications and banking giants in the region. Data centers have proven to be a lucrative investment, outperforming other property sectors. Data center investments are projected to have a compound annual growth rate (CAGR) of approximately 15% from 2020 to 2026.
This market continues to attract several investors, mostly institutional, and multiple transactions in this regard have been recorded in the past few years. There is great potential and opportunity for investment in more data centers across Africa as demand rises for high quality and cost-effective facilities. Further, the growth of fintech companies, banking institutions, and mobile network operators has contributed to the rising demand for data centers.
Cold Centers
These are facilities designed to provide temperature-controlled and monitored warehouses, and may combine this service with transport and logistics so as to deliver cold room services to clients. Some of the targeted clientele include the agricultural sector, meat, poultry and seafood sector, food manufacturing sector, supermarkets, quick service restaurants and hotels, and pharmaceutical companies.
Our View
Africa offers a range of opportunities for real estate investments with many African countries becoming popular destinations for investors. The expectation going forward is growth of investment in these emerging real estate trends, and the sector is expected to experience significant growth.
Therefore, it is important to take up the opportunities presented by the current trends and dynamics of the real estate market. The real estate sector in Africa is rapidly evolving with a number of trends emerging to reflect the various needs and preferences of both consumers of real estate products and investors.
With various factors at play such as growing economy, increase in demand for housing, rising middle class, and advancement of technology, the real estate sector in Africa has witnessed significant transformation from traditional approaches to current trends over the last few years.
Source: Oxford Business Group, Statista, Briter Bridges, ABiQ and Sterling Real Estate Advisory