Three mega trends in Africa’s commercial property development

Lagos, Nigeria

Economic growth potential and the socioeconomic needs and demands of Africa’s rapidly growing population will continue to determine major infrastructure projects.

With unprecedented interest and investment into Africa there is also a significant amount of investment into infrastructure development, though generally the emphasis is placed on major government-led projects that are aimed at offering a service, or increasing access to resources and assisting to open up key markets.

However, the knock-on effect of this ongoing focus on macroeconomic development is having a substantial impact on the next layer of infrastructure. From our vast multi-disciplinary experience across the continent, we have identified the following major trends that will influence Africa’s commercial property development well into the next decade.

1. Savvy retailers targeting growing middle class

Africa continues to experience exceptional growth and the number of people who are being lifted out of poverty as a direct result of the ongoing macroeconomic growth is adding numbers to Africa’s emerging middle class at an astronomical rate. In fact, according to a report by the World Bank, Africa has the fastest growing middle class in the world.

While there may be ongoing debates on whether the emerging middle class has regular disposable income and, what they may be spending their disposable income on; this hasn’t deterred the considerable interest and investment by developers, retailers and brands to establish themselves within key regions or countries in Africa. In fact, research by Broll Property Group indicates that African consumers are demanding better products and services from a greater variety of brands and this – with the growing middle class – has intensified a number of investments into Africa’s retail sectors and is driving the rise of the shopping mall on the continent.

We are seeing this trend take effect first hand; with a number of new shopping malls and/or retail commercial parks being developed – particularly within key pockets in the Southern, East and West African regions.

2. Expect a big drive towards “building green”

While Africa is said to be the world’s final frontier for resources, much of Africa is still underdeveloped, remote and has little access to basic services such as power and water. To bring about change, African governments have certainly begun to realise the potential of renewable energy, with a number of projects that are under development – or already operational – that will plug “greener energy” into regional and national grids. On top of this, reserves of fresh water for the world are said to be stressed and while most countries on the continent have not (yet) been declared at risk, the reality is that water is not a renewable resource. In recognition of this a number of African governments have begun to place significant focus on water preserves for future generations – particularly during this phase of ramping up on mass infrastructure development on the continent.

In the commercial property market, smart developers will realise that “building green” and building for sustainability not only better enables the development to leverage on the power and water resources that are available, but it makes good business sense. Previously it may have been thought costly to make the upfront capital investments to go green, however, volatility in both the cost and availability of power and water is influencing a mind-set change – in that savvier consumers are realising the benefits of being more “green” and, for example, offsetting as much of their energy consumption as possible.

In the long-term, not only do green buildings enable the consumer to reduce their consumption, but building green also increases the propensity to reduce the carbon emissions emitted by these developments and provide increased resilience to uncertain service delivery. These are significant value adds to the consumer – and what benefits the consumer also benefits the developer/owner.

3. New urbanism will come to rural Africa

There’s no denying that in recent years there has been an incredible migration to African cities and built up areas as growing populations seek access to jobs and basic services. In fact, the African Development Bank (AfDB) projected that by 2040 50% of Africans will live in urban areas, which means there will be an astronomical growth in the populations of Africa’s already densely inhabited major cities.

While this migration and the ongoing rapid urbanisation across key markets in Africa are natural events that follow the macroeconomic growth, these events do place significant strain on typically old and insufficient infrastructure and resources in-and-around these cities and built up areas. This, coupled with the fact that several of the industrial drivers behind Africa’s macroeconomic growth – including mining and agricultural activities in particular – are generally located away from urban areas, will drive a movement towards ruralisation or new urbanism.

A global design movement; new urbanism promotes the restoration of compact, walkable, mixed-use urban developments that bring residential neighbourhoods, retail and commercial parks back together in a healthy city environment. In South Africa – particularly in Gauteng – there are already several successful examples of mixed-use developments, including; Menlyn Maine, Steyn City and Waterfall. Although these examples do still fall within what would be considered urban or built up areas, taking a similar approach as new urban mixed-use developments to outlying cities or towns offer vast opportunities to tap into previously excluded property markets across rural-Africa.

Economic growth potential and the socioeconomic needs and demands of Africa’s rapidly growing population will continue to determine major infrastructure projects, where we anticipate that industrialisation, consumerisation and the need to do these sustainably, will become driving forces behind commercial property development across Africa in the foreseeable future.

John Truter is the chief operating officer of WSP | Parsons Brinckerhoff, Structures, Africa