24 Jul Investors Attracted to Copperbelt Property Sector
July 17, Lusaka.With several large transactions predicted to take place in 2019– including one of the continent’s largest –– is the current malaise affecting the Zambian commercial real estate market misplaced?
According to Carl Johan Collet of Urban Africa Real Estate Group (UARE),one of the country’s most respected developers, the current volatile environment is “tough” and may well get worse before it improves, as the Kwacha US Dollar exchange rate could slide further according to some forecasts. There is; however, according to Collet, still opportunity for significant upside.
In such an environment, Collet argues that there is “opportunity for those with a strong risk appetite and the wherewithal to ride out downturn to pick up high quality, attractively priced assets”, particularly within the Copperbelt region and Solwezi.
After accurately predicting the likelihood of the current currencydepreciation and its impact on the real estate sectorat last year’s forum, he willlaunch UARE’s second market report entitled, The Copperbelt Real Estate Report’at the 4th annual ZamRealProperty Forum on 4thSeptember.
Collet’s views are shared by ZamReal’s host KfirRusin, whomas the host of eight other investment conferences across Africa, is well versed in the growing pains impacting many of the continent’s emerging property markets.
“Zambia’s real estate market may be subdued currently, but this is cyclical and uncertainties pertaining to interest rates, overt currency controls and land rights which bedevil other African markets are not an issue here.”
Adding that the current acquisition spree by international funds is proof of a market that is now offering attractively priced assets to opportunistic investors.
“We are seeing acquisition and moves within the market, which points to improved sophistication, diversification and, most importantly, increased liquidity.”
According to Collet, the diversifying economy of the Copperbelt(including Solwezi) provides significant opportunitiesfor investors and developers.
“The Copperbelt remains attractive for investment, and for us, the most intriguing investment opportunities remain in hospitality and inserviced land.”
As a region, the attractive cities, nodes and opportunities in the Copperbelt region are the ones that have emphasized diversification particularly in agriculture, infrastructure, manufacturing and trade. Those that have been too focused on mining risk over exposure to the volatility of copper pricing.
While not discounting the retail and office sectors, UARE’s research indicates that both these sectors are oversubscribed, with retail proving to be the darling of developers in the country with more than $90 Million traded in four transactions since 2015.
“Since 2014, there has been over 95,000m2 delivered to the market, but we predict that developers are likely to hold back in the next 12-18 months as they wait to see what the impact the latest injection alongside current economic headwinds will have on the market,”comments Collet. The exception, he notes, is the Nkana Mall in Kitwe which, due to a protracted funding and development timeline, will deliver 22,000m2 to the market later this year. That said, “A rising copper price would create economic impetus for additional development in hospitality, office and logistics sectors,” adds Collet.
The additional significant supply has met with strong demand in the retail sector, with occupancy levels at the malls reaching 95-100% over the past five years. Many of the major supermarket anchors such as Pick n Pay, Shoprite and Choppies, have continued to drive growth in this sector as supply chains continue to improve.
Despite current occupancy levels, the economic situation is likely to result in falling occupancy levels to reach 90% in prime and 75-80% in secondary stock in the coming months. Furthermore,significant pressure on landlordsto improve theirrental terms due to exchange rate depreciation has already begun.
Despite these challenges the market rental for prime is between $10-$14for fully fitted anchor accommodation, which is “increasingly becoming a standard” requisite by the supermarket chains. Prime line rentals now vary between $15- $25 per m2 (100m+) depending on size, although averages have certainly come down closer to $15 per m2.
For Collet, the primary opportunity in hospitality, which aligns to that of current Africanhospitality trends, is the growthin mid-tier business hotels with a number of branded hotels enteringa marketcharacterized by a lack of quality and affordability.A key case point is Solwezi’s lack of options, with the one lodge completely dominating the market in a town housing Africa’s largest copper mine.
“We see hotels in the $80-120 for the local market and for international visitors at approximately $120-160 per room,”says Collet. “Even lower priced, international quality hotels would do very well”
The many recent hospitality developments in the Copperbelt have performed well despite current economic headwinds as there have been a number of manufacturing, infrastructure and exploration construction projects being undertaken in the province continuing to create demand into first and second quarters of 2019. Proof of the new entrantsincludes Kitwe’s 130-key Tsogo Sun’s Garden Court and Ndola’s 80-key Protea Marriot, which has brought the region’s 2-4-star hotels up to 20, with over 700 rooms.”
From a serviced land perspective, growth in towns like Ndola and Kitwe, which are continuing to increase at 3.5%+p.a. and urbanising at 3% p.a., creating attractive plan-and-plot opportunities that the market are yet to fill. A trend which has not gone unnoticed by ZamReal’sRusin. “Quality and well-priced housing assets are arguably the biggest challenge and opportunity across SSA, and Zambia is no exception with developers leading the way.”
About the ZamReal Property & Infrastructure Forum
ZamReal is a one-day forum centred around the Zambian Real Estate market. The conference brings together both local and regional high-calibre delegates including developers, investors, ministers, financiers as well as property professionals looking to expand their Zambian real estate business.
The 2019 theme: Where to Next?
In an environment of rising debt levels and interest rates, this year’s ZamReal forum will explore how industry stakeholders are operating in the current climate and how the development of critically needed transport networks (Road & Air) can provide the impetus needed to drive the sector forward.
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