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What is the future of commercial and office property in Africa?

05 Sep 2018

Around the world, the commercial occupier market is taking a fresh look at property: as an enabler for business, they expect their premises to create a conducive working environment that drives productivity while promoting employee wellness. Is the African property market delivering on these expectations?

“The African continent is seen by many corporates as integral to their ambitions for future growth and margin improvement through emerging markets," says Turner. Picture: Accra, Ghana

"Africa is still in the early stages of this journey,” says Jonathan Turner, General Manager of Global Occupier Services Africa at Cushman & Wakefield Excellerate, but, he adds, just as there are areas where the sector is performing well in this regard, there are also areas for improvement.

“The younger generation now entering the workforce have an entirely different mindset to their predecessors,” Turner notes.

“Instead of simply functioning as a place of work, they expect their offices to provide an experience.”

Ideally, workplaces should offer a variety of settings for different work activities, including areas for quiet work, for stimulating creativity, and for team or project work. At the same time, contemporary workplaces must be structured to facilitate social engagement.

“Underpinning this is a growing commitment to sustainability and the implementation of associated initiatives, both within the workplace as well as the way in which buildings themselves operate and physically perform,” Turner observes.

This runs through to life cycle cost efficiencies for occupiers, including sustainability credentials such as reduced emissions.

Although Africa’s property sector is burgeoning, with many markets undergoing an exciting evolution, cost is often an obstacle that prohibits developers from meeting all of these requirements. This is especially the case for local companies, says Turner.

Although Africa’s property sector is burgeoning, with many markets undergoing an exciting evolution, cost is often an obstacle that prohibits developers from meeting all of these requirements, says Turner. Picture: Lagos Nigeria

The innately conservative nature of African companies is also an inhibiting factor, as it impacts on workplace practices. But, he insists, this doesn’t mean that occupiers should ignore the possibilities presented by the African property sector: there are plenty of opportunities for existing office space to be used as a catalyst to transform workplace behaviours in order to achieve business goals.

Turner says this is important, given that expansion into Africa is a critical strategy for many multinationals.

“The African continent is seen by many corporates as integral to their ambitions for future growth and margin improvement through emerging markets. From a real estate perspective, this is reinforcing the establishment and growth of regional hubs in sub-Saharan Africa, so that these become springboards for regional operations.”

These hubs include Johannesburg (South Africa) and Nairobi (Kenya) in East Africa, as well as Lagos (Nigeria) and Accra (Ghana) for West Africa, currently the continent’s most prominent markets. Other markets are starting to gather pace, although these are experiencing significantly less market activity, he says.

This may well pick up. Turner says that although 2017 was a challenging period for many sub-Saharan countries, improved economic growth is expected across the continent during 2018, thanks to a moderate recovery in oil and other commodity prices, as well as growing trade volumes, a fast emerging gas sector and the growth of fintech, which leverages mobile networks to facilitate financial transactions.

These factors are having an impact on the occupier market. Turner reports that although multinationals across all sectors are reviewing their property needs in Africa, players in the financial services, technology, fast-moving consumer goods (FMCG), logistics and pharmaceutical spaces are especially active. This is witnessed in their searches for new premises, whether to fulfil expansion or market entry needs, or replacing existing premises to secure space which is more conducive to their future business requirements.

These hubs include Johannesburg in South Africa (pictured) and Nairobi (Kenya) in East Africa, as well as Lagos (Nigeria) and Accra (Ghana) for West Africa, currently the continent’s most prominent markets, says Turner.

But can they count on African developers to deliver the type of premises they need? To a degree, Turner says. “There has been a general improvement in the quality of buildings being delivered across all major markets,” he says - but there is a caveat.

“There remains a big variance across the African continent. Aside of some core areas in key markets, the delivery of buildings of international standard are by exception.”

These buildings can be found in centres like South Africa, particularly in Johannesburg and Cape Town, as well as Durban and Pretoria, together with an increasing number of international developers coming to the fore in Lagos and Nairobi. However, issues such as the high cost of finance remain a constraining factor, as does the cost of construction, the expense of importing materials and the initial high cost of land.

Shortcomings often include planning and design, caused by the fact that professional teams may lack international experience, the quality of construction and materials, inadequate parking provision and failings in terms of planning and municipal quality control, with proper guidelines inadequately enforced.

These issues make it all the more important for occupiers to join forces with a creditable and experienced real estate services provider to navigate the space. “With the right advice, occupiers can find the premises they need to make the most of the opportunities presented by the African continent,” says Turner.

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