Macro & ESG Trends RE-Setting the Property Agenda – Africa Property Investment Summit (API) – African Business

The way in which we live, work and play has been fundamentally re-set, comments, Kfir Rusin, the host of Africa’s leading property investor and developer gathering, the API Summit (www.APISummit) (Johannesburg, 21 & 22 September). This has transformed the way space occupiers use space; how we do our business and how real-estate investors allocate capital. As we build back stronger all stakeholders in the realty value chain need to adhere to a new set principles that drive real returns, sustainability and resilience as well as affordability.

Speaking ahead of the API Summit, Standard Bank’s head of real estate finance Africa regions, Niyi Adeleye, argues that key micro and macro trends, most notably improving infrastructure supply; ESG; pending IMF deals, currency instability, and liquidity are having an effect on the broader investment case and how investors are choosing to allocate capital into the future.

“Property owners need to remain mindful of the impact of the micro and macro environment on the demand patterns of their assets. The pragmatic response is typically a conservative use of debt within a project’s capital structure to manage income volatility, should it occur. Project sponsors should also consider portfolio strategies that balance their sector exposures to minimize the impact of micro- and macro factors on specific assets, countries, and real estate sub-segments. Nevertheless, as a result of the rebasing of rents in some sectors pre-pandemic, the observation is that key sectors and a number of assets had found rental equilibrium and the observation was a trading ramp-up across a number of stabilizing assets across markets.”

Adeleye focuses on the sector performance and funding allocation. It is followed by A-grade commercial office spaces and a pleasing rebound from the hospitality sector.

According to Adeleye, retail development is still a concern in Africa as it continues to fall prey to the current macroeconomic environment.  As, Adeleye says “retail is likely to feel the brunt of the current macro pressures and inflationary trends as currency volatilities continue to erode purchasing power whilst also increasing cost of imports given the relative strength of the dollar.”

Adeleye believes that traditional real estate has not been a success, and shares the optimism about the increasing value and importance of the residential, industrial, life sciences, and data centre segments. However Adeleye cautions market participants to fully understand the demand in each sector and jurisdiction. 

“The demand patterns, the types of user base and the mission critical nature of the required spaces to the demand profile these real estate segments suggest that the sectors will show more steady performance in the medium term. Thus, the probability of out performance is likely, however, appropriate consideration is also necessary to ensure that the demand-supply dynamics of these segments are carefully monitored to ensure that massive supply overhangs are avoided.”

Adeleye says that ESG is essential to correct decision making and the preservation of value in assets and portfolios. 

“ESG considerations have become a critical component of risk assessment as the absence of these features either at an asset or portfolio levels erodes confidence around future proofing of asset demand given the importance of the theme. Similarly adapting to evolving market dynamics and urbanization trends is a reality that market participants have to continuously consider to remain relevant to their markets and demand patterns.”

In conclusion, Rusin ends that this this year’s API Summit’s diversity of speakers, companies and countries represented is evident of an African real estate sector that is moving fast and ramping up.

“The API Summit continues to attract pan African and international leaders actively pursuing deals across the continent. This year’s event also features a standalone Africa Hospitality Forum, the Africa Proptech Forum Event, an Awards Dinner and Cocktail function for over 400 attendees from 30 countries. That we are able to continue to expand and grow the event in 2022 after the Covid-19 Pandemic is testament to the value we bring to our investor community and the support of our lead sponsor Standard Bank and many others.” 

Distributed by APO Group, API Summit.

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About the API Summit 2022
The API Summit is Africa’s premier real estate event. It connects global and regional players in the property value chain. This year’s summit will play host to more than 120 speakers, 350+ in-person and 400+ virtual attendees over 2 days. From Africa’s leading banks to pioneering listed funds; institutional investors, developers, operators and more, the API Summit sets the African property agenda.