The market in which we operate |
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| GROUP OVERVIEW |
The JSE-listed property sector in South
Africa is a sizeable market, with some
27 companies managing assets valued at
over R350 billion, with an influx of capital
after the introduction of REIT legislation
in 2013. The local sector is now ranked
among the top 10 REIT markets globally,
with a comparable value to similar sectors in
Singapore and Hong Kong(1). However, only
a limited number of REITs are sufficiently
liquid to attract foreign investment, while
the unlisted real estate market is dominated
by South African institutions.
Since 1994, population growth, urbanisation and a rapidly growing
middle class have fuelled demand for retail space, placing South Africa
in the global top 10 by shopping centres and total floor space. With
over 2 000 shopping centres, the country ranks sixth (behind the US,
Japan, China, Canada and UK), and seventh on floor space, with some
23 million square metres. While some studies suggest that South Africa
has more mall space per head (measured as m2/1 000 people) than its
retail sales appear to justify, vacancies – a key indicator of a property
sector’s health – remain lower than the average for other countries
through the cycle.
A changing market
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Importantly, the retail sector has become an important component in the national economy, accounting for more jobs than the mining sector, with hundreds of thousands more jobs indirectly related to the industry.(2)
(1) PwC: Real Estate: Building the future of Africa, 2015
(2) Urban Studies Publication (June 2015) Lisa Steyn: Mail & Guardian |
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Investing in sub-Saharan Africa
Rapid urbanisation, population changes and global megatrends
such as industrialisation, technology and sustainable city
planning will drive growth in the real estate industry across
Africa over the next five years(2). In almost all markets surveyed
in the PwC report, demand for quality retail, office and
industrial space is outstripping supply as international and
local occupiers capitalise on economic opportunities. The
report identified key growth drivers as:
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Africa’s young population is underpinning demand for different types of real estate |
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Industrialisation will be accompanied by rapid growth in
the retail sector |
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Exports of natural resources and agriculture will remain key
sources of economic growth, in tandem with increased risk
for certain countries |
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Infrastructure shortages will create opportunities for
investment |
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Government policy and legislation will influence the
decision to invest, while local partnerships will become
increasingly important |
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Continued progress in pension fund, stock exchange and
banking regimes will facilitate investment, and a broader
range of investors will drive demand for real estate
investment opportunities |
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Technology will impact business and building practices,
as well as consumer behaviour |
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Sustainability will become entrenched in building design
and occupier requirements, with Africa’s most ambitious
countries changing city design and building practices. |
Real GDP growth (%)
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Source: Global economic outlook: Sub-Saharan Africa regional
forecast, The World Bank |
The weakening and volatility of African currencies is a risk to
the company, as it places local tenants under pressure, with a
consequent potential negative impact on income.
For REITs like Hyprop, a sustained economic growth rate of
around 5% for the continent means an expanding urban class,
with the propensity to spend.
Sub-Saharan Africa (excluding South Africa) still has a
significant shortage of quality retail property – around two
million square metres catering for over one billion people,
compared to South Africa with 23 million square metres for
55 million people. Rapid urbanisation also means metropolitan
populations are expanding at over 3% per annum, with some
cities, such as Accra where Hyprop has a presence, growing at
a rate well above that.
Compared to a decade ago, the metamorphosis across
African cities is notable – from an explosion in real estate
development to the new consumerism. And with a young,
urbanising population, all forecasts support the trend
continuing.
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Manda Hill Shopping Mall, Zambia
