Future of Real Estate business in an evolving and challenging African environment by Dr. Bekithemba Mpofu Ph. D MBA MSc BSc FCMI CBIFM Senior Lecturer in Real Estate Investment, Finance and Economics
Main sources n n n n World Economic Forum (2016) Environmental Sustainability Principles for the Real Estate Industry Pw. C (2014) Real Estate 2020, Building the future Prudential Real Estate Investors (2012) A birds Eye View od Global Real Estate Markets: 2012 update EY (2016) Global Market Outlook: Trends in real estate private equity Bennet Kpentey (2017) RICS Keynote speech: African economic outlook United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, Highlights Ian Palmer (2017) Land infrastructure in African cities, RICS Conference
Young population Population Growth Inf ras tru ctu re Ga p Ur ba niz ati on Opportunities ility nab Funding op tai portunities us S Te ch no log y
Africa’s demographic trajectory (Ian Palmer)
Urban and rural population of the world, 1950– 2050 Source: UN, DESAP Division (2014)
Urbanization statistics n n Urban population to increase to over 6. 3 billion by 2050 (75%) 1950 (30%), 2014 (54%), 2050 (70%) in urban areas Global construction to double to US$15 trillion in 2025 compared to 2012 Asia fasted growing followed by SSA
Urban and rural population as proportion of total population, 1950– 2050 Source: UN, DESAP Division (2014)
Median age by region (Pw. C)
Youthful African population n Compared to the rest of the world Africa will have a workforce asset come 2050 n n n Over 60 will exceed under 15, thus calling for specialist real estate Also aging population will limit house prices Increase in population and aging will lead to several subsectors n n Affordable housing, Healthcare, Agriculture, retirement homes etc Increase in young middle class, will increase demand for real estate
Africa’s growth by region, 2014 -17
Economic growth n n Real estate integral part of growth When a country is doing well, there is pressure for the government to invest in infrastructure By 2025, Nigeria will need 20 million new homes According to AFDB by 2060, about 1. 1 billion Africans will be in the middle class thus increase
Key urban development drivers Source: African Centre for Cities and Df. ID – using Oxford Economics data
Infrastructure gap n n n US$93 billion required annually over the next 10 years to address its infrastructure gap in SSA Africa currently has an annual financing gap of over US$50 billion GDP growth is reduced by 2% annually due to poor infrastructure and productivity by as much as 40% annually
Technology n n It can be an enabler of real estate business but also a disruption Online shopping calls for a shift in traditional spaces especially for the digital generation Agile working enabled by technology supports working from home and satellite offices As an enabler, technology helps real estate given its heavy reliance on data management
Funding n n Basel III and US Dodd-Frank regulations, reduces banks and insurers’ direct involvement in real estate funding EU Solvency II Directive reduces the ability of European insurers to invest Private capital and innovative funding options need to be developed RE managers to place a central role in the financial ecosystem.
Real estate’s contribution to energy use and CO 2 emission Source: Accenture (adapted from IPCC, USBC, EC)
Sustainability n By 2030, world population will need: n n 50% more energy 40% more water 35% more food UN Climate Change Conference (COP 21), Paris 12/15 agreed: n n n Keep global warming below 2 degrees To stay under 2 degrees, RE requires stringent targets World Bank, 36% reduction in total CO 2 emissions in RE required by 2030
Green premium n n Prime real estate now reflect building’s sustainability credentials through green premium in advanced economies Challenge for RE managers is large brown discounts
Threats Corruption Po lit ics ing nd Fu Urbanizatio n sta bil ity Infra struc ture Gap Go ve rnm po lic ent ies Sufficiently skilled professionals
Strategies n n Collaborate with government Joint ventures Factor technology & and sustainability Pursue framework contracts and long-term relationships
Strategies…… continued: Specialisation n n Subsector specialisation n Urban economic analysis n Deal structuring n Asset value management Product development
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