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Despite weaker reported transactions, Africa recorded over 700 separate inward investment projects in 2018.
According to new Africa Horizons report published by Knight Frank, investment destinations were broad but that of five countries including Nigeria, South Africa, Morocco, Kenya and Ethiopia accounted for over half of the projects.
Besides, the report noted that half of the investment projects originated from corporations domiciled in the United States of America (US), United Kingdom (UK), France, China and Germany.
The study highlighted that office yields remained largely stable in most African markets over the past two years. This, it said, was anchored by patient domestic capital as local investors assumed a longer-term perspective.
Of the 35 office markets covered, the report stated that yield remained stable in 16 locations in the two years to 2018 and rose in six, while 13 markets recorded declines.
According to the Knight Frank’s Horizon report, by taking a longer-term perspective and in some cases a lower return profile, local investors have remained more active than headline figures suggest.
This it said explained how yields in most major markets have remained stable in the face of weaker reported transactions.
The report noted that just under $2 billion worth of deals in Africa were publicised in 2018, which predominantly involved assets in South Africa.
“Contrary to the global trend, Africa’s recorded transaction activity peaked in 2016, and has since eased.
“Notably, private capital remains an important driver of investment activity in much of Africa, although ultimately somewhat opaque,” the report read.
According to the study, healthy economic prospects have suggested that Africa would remain a compelling investment destination for those targeting key centres.
In addition to the office markets in these locations, the study noted that rising wealth would favour sectors exposed to consumer logistics, and selectively, retail.
“We envisage rising investor demand for those African locations that can demonstrate something of a counter-cyclical nature, combined with rising domestic wealth,” the report said.
It noted that yields in 2018 in Nairobi stood at eight per cent for office, 8.5 per cent for logistics property and nine per cent for retail.
The report pointed out that A-grade warehousing in Nairobi currently commanded monthly rents in the upward of $6 per square metre, a rental value that almost double that of the predominant stock of older units that lacked modern features such as cross-docking and intermodal facilities.
On the outlook, the study predicted boom in Kenya’s real estate industry in 2019, following a stagnant economy brought on by political turmoil.
According to Knight Frank, Kenya’s Managing Director, Ben Woodhams, “yields in each of the market segments align to their risk profiles, with retail being much riskier in Nairobi currently hence the proportionately higher yield.”
Top residential investment opportunities across the continent, the report said included student accommodation (with Zambia, South Africa and Kenya being education hotspots), retirement homes, and middle-income housing as demographics change.
It noted that in Kenya’s logistics sector, formal retailers have emerged as a major driver of growth owing to their increasing need for large centralised warehouses, as they gain critical mass countrywide.
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