Sub-Saharan Africa: Emerging Beyond the Frontier

Author: Matthew McAuley

As home to some of the world’s fastest-growing city economies, with rapid rates of urbanisation and burgeoning middle classes, Sub-Saharan Africa is entering a new phase of urban development.

The region’s economy has doubled over the past 15 years, driven not only by commodities, resources and more stable governance but, increasingly, by financial and business services’ growth and consumer spending in its cities. At the same time, rapid demographic changes, particularly in the working-age population, are contributing to an expanding middle-class population which is overwhelmingly urban and expected to rise from 140 million households currently to 250 million by 2030.

This sustained economic and demographic growth are combining to create urban markets of global scale, and generating a need for significant investment in the region’s urban infrastructure. As demand from corporations and consumers for modern retail, office and commercial infrastructure increases, Sub-Saharan Africa is entering a high-growth period of development; infrastructure investment across the region, including for commercial real estate, is expected to expand by 10% per year over the next decade, reaching an annual total of US$180 billion by 2025.

Sub-Saharan Africa Emerging Beyond the Frontier
JLL’s recent report ‘Emerging Beyond the Frontier highlights the growing attraction of Sub-Saharan African cities as real estate investment destinations, with a broad range of new equity sources focusing on commercial real estate – including private equity, sovereign wealth and pension funds, REITS and institutions – becoming increasingly active in the region.

An indication of this momentum is provided by Sub-Saharan-Africa focused real estate funds; since the first fund was launched in 2007, an additional 15 have been established, committing over US$2bn of equity projects. A further US$4-5 billion is currently being raised to focus on commercial real estate in the region’s cities, with US$7-8 billion expected to be committed by 2020. Continuing on this trajectory, we estimate that by 2020 there could be up to US$15 billion of new commercial stock delivered across Sub-Saharan African cities by real estate fund platforms.

This investment is also drawn from a wide variety of sources and locations. While nearly half of capital raised by regionally-focused funds is from South Africa, JLL’s fund survey indicates that up to 25% is being raised from North America, and 20% from Europe. While this only provides part of the picture, given that there are many domestic and international groups developing and investing in the region’s cities directly, it gives an indication of the growth of interest in the possibilities offered by commercial real estate in Sub-Saharan Africa’s key cities.

While significant hurdles to investing in real estate in Sub-Saharan Africa remain, including market transparency, political instability in some markets and complex legal considerations, these challenges are not unique to the region and are faced by many other emerging as well as mature markets. The next decade will bring significant changes to the cityscapes and urban economies of Sub-Saharan Africa, and with sustained economic and demographic growth real estate will have an important role to play in providing the infrastructure and environment to facilitate new forms of working and living in cities across the region.


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