Analysis

Growing investment in real estate 

In the past six to twelve months, private equity firms have taken Africa’s real estate market by storm with millions of dollars in investments, especially in the retail and the hospitality sectors. Total investment in this sector in the past one year is in the region of $652 million.

Analysts explain that this growing interest in the Nigerian market is as a result of huge demand fuelled by increasing urban population and changing shopping culture among the growing middle class, making the country an attraction for modern retail malls.

Nigeria is estimated to have seven cities with a minimum population of one million, which also makes it a destination for investment in shopping mall development. An average of 5.7 million Nigerians are considered to spend, on the average, $10 to $20 per day.

The country also has an estimated $115 billion annual consumption spend.

It is against this backdrop that a number of institutional investors including Actis, FirstRand Limited, International Finance Corporation (IFC), The Artee Group, Capital Alliance Nigeria, etc, have raised and invested millions of naira in retail and commercial property in Africa, with Nigeria as their top target.

Actis recently announced plans to develop three new malls in Nigeria as part of its $278 million investment in retail and office space developments in East, West and Southern Africa.

FirstRand Limited has closed a $250 million fund raising exercise with plans to invest the proceeds across major West and Southern African real estate markets, particularly Nigeria, Ghana and Angola. IFC, a member of the World Bank Group, and its partners have announced a $124 million investment in the Persianas Group, an indigenous real estate development firm.

In the same vein, the Artee Group, which already runs SPAR and Park & Shop in Nigeria, is planning to open 100 shopping outlets in Nigeria in the next six years and the proposed outlets will come as hyper format units, comprising 400 to 500 shops located within the outlets.

All these, in our estimation, have huge potential to create far-reaching job opportunities for various skill sets. From professionals – structural engineers, architects, and quantity surveyors – to artisans: bricklayers, carpenters, iron-benders, labourers and even food vendors.

It is lamentable that these multi-billion naira opportunities in Nigeria are hindered by a yawning gap in skilled manpower. Manpower is one half of the problem. Other challenges that have held down real estate and construction industry growth in Nigeria include high interest rates, regulatory challenges which include Land Use Act, property registration and title documents. The industry’s low contribution to GDP is estimated to be less than 5 percent.

Dearth of skilled manpower has shut out Nigerians from this industry. It also raises the cost of doing business, as artisans, because they are competent and honest, from neighbouring countries, notably Ghana and Togo, do most of the work.

Savvy Nigerian businesses can seize this opportunity through professional partnerships, franchise, joint ventures or wholly-owned institutions. For those looking to develop, artisans partnering with Ghanaian and Togolese counterparts will be of immense benefit.