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$600m investments came into Nigeria’s real estate sector in 13 years – Report

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$600m investments came into Nigeria's real estate sector in 13 years – Report

Nigeria’s real estate sector attracted $600m investments in 13 years, according to a report by Estate Intel.

Titled “African Real Estate Capital Trends Report 2024”, the report said, “The Estate Intel data showed that up to $30bn worth of transactions have been undertaken in Africa over the past two decades.”

According to the report, “Key cities in South Africa, Nigeria, Egypt, and Mauritius have led the charge. The overall attraction is underpinned by their robust property markets, popularity as Africa’s business hubs consequently attracting investment, and specifically South Africa’s robust capital markets supporting its investments. Even post-COVID, these countries still dominate Africa’s real estate market.

“In contrast, there are a few stand-out countries that have attracted large amounts of institutional capital with a relatively smaller economy. These include Mauritius, Mozambique, and Senegal, all of whom have been very popular with the better-performing hospitality and industrial sectors.”

It noted that while Africa remained among the world’s greatest hotspots for diversity, 10 of the largest economies out of its 54 countries accounted for 71 per cent of the continent’s GDP.

“54 per cent of the population and 98 per cent of all investment activity are currently being tracked,” It stated.

Speaking on the Environmental, Social, and Governance agenda in the country, the Research Director at Estate Intel, Dolapo Omidire, said ESG had played an increasingly prominent role in shaping the African real estate capital landscape.

He said, “We have seen the provision of green and ESG-linked financing for real estate transactions grow by an annual average of 41 per cent since 2018, bringing us to a cumulative total of US $4.2b in mid-2024.

“With over US $1.3b announced year to date, 2024 has seen record-breaking green and ESG-linked property financing activity. Estate Intel is forecasting that this will cross the $2b mark before the year runs out as ESG themes become increasingly popular among institutional investors.’’

The Estate Intel research director noted that amid exit struggles, debt payment was being used as a proxy for acquisitions.

“We typically wait for at least three events to call a trend. But in the two interesting examples we highlighted, debt payment is used to help close a sale where a standard sale failed and was too good to ignore. The case studies in question are in Nigeria and the retail sector linked, with one of the examples being Gruppo’s plan to settle a $25m senior debt using Ikeja City Mall sale proceeds.

“Precisely, the firm announced plans to dispose of its 75 per cent interest at Ikeja City Mall to Actis through its NREIF fund in November 2020. As such, Actis will own 50 per cent of the resultant shares and shareholder loans in it, and advance a shareholder loan to Gruppo for an aggregate consideration amount worth US $25m, which Gruppo intends to use in settling its senior bank debt,” he explained.

Omidire asserted that institutional interest was strongest in the hospitality market, adding that a strong institutional interest had historically been witnessed in the hospitality, retail, and office sectors, with the overall growth rate averaging 23 per cent per annum across the market.

“The hospitality sector, in particular, has recorded the highest deal volumes and value worth over $2.5bn (exclusive of South Africa), with the post-COVID-19 period realising the highest activity. This is on the back of tourism resurgence and increased investor interest in smaller and Francophone countries, such as Senegal and Côte d’Ivoire.

“Transaction yields on average have remained relatively stable at 8.7 per cent since 2014. Notably, the hospitality and industrial markets registered yields lower than the market average at 7.5 per cent and 8.1 per cent, respectively, citing attractive transactions to investors. On the other hand, the retail and office transactions recorded yields averaging 9.3 per cent.

Estate Intel data showed that up to $30b worth of transactions had been undertaken in Africa over the past two decades.

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“Key cities in South Africa, Nigeria, and Egypt have led the charge, with the overall attraction underpinned by their robust property markets, popularity as Africa’s business hubs consequently attracting investment, and specifically South Africa’s robust capital markets supporting its investments,” it indicated.

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