Africa’s Commercial Real Estate market has registered growth in 2022 and the sector anticipates a better year business-wise in 2023, according to Knight Frank. The four trends the firm expects to define 2023 are: data centers, ESG considerations, hybrid working and rising economic woes.
Data centers
According to the firm’s recently released Africa Industrial market dashboard, data centres and modern logistics facilities are fast emerging as significant new demand drivers in Kenya, Nigeria, and South Africa. Investors, landlords, and developers are responding to rising requirements by expanding existing data centres and building high-quality warehouses, which remain in short supply.
ESG
Several governments around the continent have already passed legislation to encourage the development of ESG-compliant buildings. Businesses are actively targeting higher-quality space to mitigate talent retention challenges and meet increasing ESG considerations, which are primarily confined to international businesses. According to Knight Frank’s research, Africa has approximately 785 green-rated buildings, and 641 are in South Africa alone.
Hybrid working
Occupancy levels in some African countries have remained relatively stable despite the widespread adoption of hybrid working. This has been driven by greater landlord flexibility as well as the inability to break leases. Nonetheless, more firms are downsizing or renegotiating their leases on expiry. To maintain occupancy, landlords will need to do better to deliver what occupiers want, such as modern, prime Grade A space that is also ESG compliant, Knight Frank says.
Rising economic woes
Despite emerging stability in the office market, many African countries are struggling with spiking inflation and repeated currency devaluations, which are stalling economic recovery and making some occupiers nervous about pursuing expansion plans. Increased unemployment rates across the continent, is adding to economic woes, as well as the war in Ukraine and slowing global growth.
Overall, Africa is slowly returning to normalcy, Boniface Abudho, Africa Senior Research Analyst at Knight Frank, argues in “The 2023 Commercial Real Estate outlook in Africa.”
