Making sense of the latest trends in real estate across Africa requires a combination of experience, data and in depth insights.

In our latest instalment of guest articles we speak to Kevin Teeroovengadum, a real estate specialist with over 20 years experience across the continent to find out more on the opportunities to shape and revitalise real estate across Africa over the next decade in this 2 part interview series.

 

What most excites you about the real estate industry today?

Real estate sector was once considered as plain vanilla, where you build and then sell or lease out and you get long term passive income and where returns trade above 10-year government bonds. But what we are finding today is there are many challenges and changes happening in the real estate sector globally which makes it a dynamic sector. Here we can see new real estate asset classes coming up such as retirement, or healthcare and then rejuvenation of traditional real estate asset classes such as office buildings especially in a post-Covid era. The excitement for me is to see this possibility of change in a sector that has been quite stable and consistent over the last 50 years.

 

There used to be a more traditional division between commercial real estate and residential. One of the changes that we have seen, that started happening before COVID, but accelerated during the pandemic, is that some of our personal space became commercial real estate. As such, how do you expect the dynamic of distressed assets and repurposing to play out in the majority of the markets? 

This is a great opportunity, and I can see astute developers taking position in this segment of rejuvenation. One of the real estate companies in Mauritius where I sit as an Independent Non-Executive Director is doing exactly that, focusing on rejuvenation of classical and traditional real estate assets that were developed 40 years ago and where the usage for today/tomorrow is totally different for what these assets were originally built for. 

 

Let’s look at the major cities in Africa, whether in down-town Lusaka, Nairobi, Accra, Port Louis, Lagos etc. So many existing assets, like old office buildings that could be rejuvenated or converted into residential, students’ accommodation, hotels, health-care or education hubs. In other areas, we can see old factories that can be converted into flex offices,incubator hubs, or even logistical plays. While most investors are focusing on new developments, I believe the real money from a cash to cash perspective is in these rejuvenations/conversion of the existing real estate infrastructures.

 

It has been an unusual year for the market, double digit inflation growth, rising interest rates and depreciation currencies mean it might not be business as usual. In your opinion how should investors navigate this type of volatility?

Let me be frank. Even before the covid crisis, it has never been plain sailing in the African markets. Don’t forget since 2015, we have seen how rental levels have dropped in the office market in Accra, Lagos, Nairobi and even Lusaka. And how we got an oversupply of offices in some of these markets. We’ve seen also how several newly developed retail centres haven’t worked well. We need to be cognizant of what hasn’t worked and what has worked. If we focus only on the latter, then we will repeat the same mistakes that relate to the former. 

 

Already in normal times, we have an environment which is quite difficult and with challenges. Now with the looming global recession, we have more risks for sure. We know global investors will pull out liquidity from Africa during a recession, and pricing of debt will go up. I believe investors need to be smart about their investments and they need to capture real data to really understand where the opportunities are. Too often, we keep hearing there are opportunities in a specific asset class, but when you ask for data to back it up, there’s a tendency to say we don’t have the data. This is where I really believe the likes of Estate Intel is a must if investors want to make the correct decision. We live in a data world, and we need real data to be able to build our feasibility studies and more importantly to develop assets based on real demand and not on speculation. 

 

As for the near future, I think many of my friends, developers and investors in the African real estate are underestimating the global recession. My view is hold on to cash for now, as there will be great opportunities from mid-2023 onwards.

We love your feedback! Let us know your  key takeaways from this interview by sending us an email at insights@estateintel.com. In the meantime, watch out for part 2 by 12/10/2022.