First an important fact: In many African countries, real estate is among the top five investment areas – with a very high return of investment (ROI). Just like food, water and clothing, shelter (accommodation) is one of the most basic human needs everywhere in the world and the demand for that in Africa is currently huge. With the world’s fastest growing population and rapid expansion of its urban areas, suitable accommodation for residential and business purposes is grossly inadequate and remains a huge problem in many parts of Africa.
In addition to these internal factors, more foreigners are visiting the continent for business and tourism, further increasing the demand for accommodation.This shortage of suitable accommodation is pushing up rent and property prices in cities and towns across the continent, making it one of the hottest and most promising places in the world for real estate investment.
In Nigeria for example, the continent’s most populated country, the World Bank estimates that over 16 million new houses need to be provided to solve Nigeria’s serious housing problem. The estimated cost of providing these homes stands at a whopping $350 billion. This is just for residential housing alone. There is a similarly high demand for office accommodation for both business and industrial needs.
Here are the lucrative segments of Africa’s real estate market that can be exploited by entrepreneurs and investors:
This is by far the largest segment of the African real estate market. Single room, two- and three-bedroom, and multi-family apartments enjoy the highest demand. There is also a growing trend of high-rise and tastefully finished apartments targeted at foreigners and expatriate workers. With poorly developed mortgage financing systems in many parts of the continent, only few can muster the finances to build their own houses.
Although this opportunity can be quite capital-intensive, its upside potential is quite impressive in the long run. You will often hear that lower-middle class housing and luxury houses will sell best.
There is a growing need for industrial real estate especially for distribution, manufacturing and warehouse uses. This demand for industrial real estate is mainly boosted by the increased economic and trade activities on the continent.
After residential, office space is probably the next in high demand. The pricing (rent or lease amount) of office properties are often determined by their location. Office spaces located in Central Business Districts attract higher prices than Suburban locations.
This segment includes properties for businesses that sell retail goods through stores, kiosks or in shopping malls. Such businesses include grocery, drug, department and convenient stores. Service businesses (like beauty salons) are also included in this category. As the number of small businesses increase on the continent, the demand for this type of real estate is also growing in turn.
The demand for lodging and temporary accommodation is growing across Africa. As the volume of regional and international travel for both business and tourism increases across the continent, there is a serious need for suitable hotel accommodation. The options available in Africa’s hotel market range from luxury and full service hotels to economy guest houses and motels