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 and liquidity are having an effect on the broader investment case and how investors are choosing to allocate capital into the future

JOHANNESBURG, South Africa, August 25, 2022/APO Group/ — 

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 how occupiers utilize space; how we do business and how real estate investors are allocating capital. As we build back stronger, stakeholders across the real estate value chain have to deliver on a new set of principles driven by real returns, sustainability, resilience and 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. Similarly, project sponsors should pursue portfolio strategies that balances their sector exposures to manage the impact of micro and macro factors on specific assets, countries (that may be more vulnerable) 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.”

Moving from funding allocation to a sector performance perspective, Adeleye highlights that in Africa (ex-RSA) broadly the most resilient and best performing has been the industrial segment followed by A-grade commercial offices spaces and a pleasing rebound by the hospitality sector.

This year’s event features a standalone Africa Hospitality Forum, the Africa Proptech Forum Event, an Awards Dinner and Cocktail function for over 400 attendees from 30 countries

Conversely, for him retail developments remains a concern across the continent as the sector continues to fall foul of the prevailing global 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.”

And if the traditional real estate sector has provided mixed results, Adeleye shares the optimism on the growing value and importance placed on industrial, residential, life sciences and data centres segments, but cautions market players to fully understand demand in each segment 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.”

It is this correct balancing and mitigation of risk associated with real estate investment and development in Africa that ESG is coming to the fore and increasingly critical to correct decision making and retaining value in assets and portfolios, says Adeleye. 

“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 on behalf of API Summit.