Rapid tech sector growth will fuel occupier demand across the real estate market in Africa
Tilda Mwai . 3 years ago
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Article Summary: The African tech sector is currently at an all time high, with the sector estimated to hit US$7 billion in 2022 in funding from just US$25 million in 2015. In addition, the continent now has 7 companies that have crossed Unicorn(US$1 billion dollar valuation) status from just one in 2019. With tech start-ups ranging from…
The African tech sector is currently at an all time high, with the sector estimated to hit US$7 billion in 2022 in funding from just US$25 million in 2015. In addition, the continent now has 7 companies that have crossed Unicorn(US$1 billion dollar valuation) status from just one in 2019.
With tech start-ups ranging from the most popular fin-tech sector to prop-tech, edu-tech and agri-tech, the gig economy across Africa is set to grow even bigger. At present, ride hailing apps such as safe boda in Uganda, employs up to 25,000 drivers while Uber employs over 8,000 drivers in Nigeria. Digital skilled jobs too, are at an all-time high with google estimating that there were over 700,000 developers across Africa.
With rapid growth expected within the tech sector across the continent, its contribution to employment and subsequently individual country economies is only set to grow.
War for talent driving demand for housing in Africa
In the world over, the tech sector has in many ways set the tone for the real estate market and in Africa, the case is not any different. The economic pull of Silicon Valley for example, attracted thousands of tech workers resulting in a housing price growth of 88% at the height of the tech boom between 2012 and 2019 in the San Francisco Bay Area.
With the technology sector set to be a major employment driver across key African cities, an emerging component of real estate demand is likely to be residential housing across both the affordable and luxury housing sub sectors. In Lagos, for example the existing housing supply gap coupled with the tech sector is spurring demand for young professional housing. As such, we are seeing key emerging hotspots such as Yaba tracking the overall residential market at an annual rental yield of 5% with the price of a one bedroom unit doubling in the 5 years to 2021 from 6million naira to 13 million naira This trend is only set to intensify as Lagos, Nairobi and Johannesburg emerge as the tech hubs of Africa.
Tech as a key driver of formal office demand
While the office market has continued to evolve over the past year due to the pandemic, technology has remained the core driver for hybrid and remote working policies. Tech companies themselves have also been at the forefront of driving flexible working amongst their employees. However, occupying a formal working space remains integral to the majority of these companies.
Estate Intel reviewed the top 50 tech(start-ups and multinationals) companies in each city across Lagos, Nairobi and Johannesburg and found out that 94% of these companies occupy a formal working place. 85% of these, occupied leasable space, with 3% occupying co-working spaces and 4% occupying owner occupied offices. Only 6% were fully remote companies, echoing the rhetoric that indeed the tech sector will continue to drive office demand as activity in the sector intensifies.
Repurposing
While physical offices continue to be a core element of corporate tech premises, the majority of the tech companies are more focused on flexibility and affordability. As such, anecdotal evidence in cities such as Lagos and Nairobi points to tech startups increasingly gravitating towards repurposing residential villas into office spaces not only because it makes financial sense but also due to the flexibility in strategic location.
Overall, the tech sector in Africa, presents real opportunities for investors and developers in the mainstream real estate and also in the alternative sectors such as data centers as highlighted in this article. While there is no ‘one-size-fits-all’ approach, we expect to see more opportunities on the occupier/tenant end of the market to meet a new, evolving demand in the market.
We love your feedback! Let us know your feedback on the impact of the tech sector in real estate in Africa by sending us an email at [email protected]
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