Under pressure but picking up — the state of Africa's real estate markets

Daily Maverick

20-05-2025

Africa's real estate sector is neither collapsing nor booming but is pivoting towards solar-powered malls, cold storage hubs, data centres and housing.
A cocktail of Covid-related aftershocks, sovereign debt crises, rising interest rates and fiscal strain has left the African real estate sector bruised, but not broken.
A reshuffle, pushed by return-to-office mandates, climate pressures, digital expansion and population growth, is under way.
'We are now seeing increasing evidence of a recovery in pricing,' noted Nils Rode, CIO at Schroders Capital. 'Deal volumes and transaction pricing [are] showing positive trends.'
Dr Kunle Awolaja, president of the African Real Estate Society, also noted that the size and value of the formal real estate market in Africa have shown 'significant growth' over the past five years and are projected to continue on this upward trajectory.
Across the continent, there is no one-size-fits-all. 'Each market is in a different state of development or recovery,' said Adeniyi Adeleye, head of real estate finance for Africa regions at Standard Bank.
SA – resilience by the square metre
South Africa, home to one of Africa's largest property sectors, might not be leading the pack, but it is still taking part in the race.
'If you look at the South African property markets, you would find that there was pressure during Covid, and that pressure has somewhat eased out,' Adeleye said. 'Latest statistics talk about the office space having bottomed out… the retail [market] recovered quite quickly post-Covid.'
According to Simon Fiford, senior vice president of real estate coverage at Standard Bank, the bank estimates that South Africa's commercial real estate sector is valued at about R1.9-trillion, up from R1.3-trillion in 2015. Add to that the residential market, worth R6.9-trillion, and the total property market exceeds R8.8-trillion as of the end of 2024.
This rebound hasn't reached every corner.
'The structural undersupply of affordable housing in the country remains a challenge,' said Fiford. 'Government-subsidised housing makes up 32% of residential units or about 2.18 million homes.'
Residential represents nearly 90% of South Africa's total property volume, according to the Centre for Affordable Housing Finance in Africa, underscoring their centrality to household wealth, Fiford said.
Infographic by Kara le Roux
'There are big residential clusters in South Africa,' Adeleye observed. 'But from that multifamily housing investor class or subsector is still something that is developing in South Africa.'
Multifamily housing refers to residential properties designed to accommodate multiple households in the same building or within a complex of buildings.
Return to office
Africa's office space market is finally starting to stabilise after the pandemic.
'We found that in the rest of the continent, people went back to the office a lot quicker than in South Africa,' Sandile Mpanza, head of commercial property finance Africa region at Absa Corporate and Investment Banking, said.
According to Adeleye, in markets such as Nairobi, Accra, and Lusaka, the return to office was at a 'much faster pace' compared with South Africa.
'Most homes were not designed long-term for permanent users' work,' Adeleye said. Power outages, poor connectivity and small living spaces made remote work in Africa unsustainable.
Green A-grade office spaces are attracting tenants. 'Demand for high-quality, ESG-compliant office spaces is rising,' Awolaja said, 'with some developers refurbishing older buildings to meet these standards.'
'What we are seeing is a flight to quality,' Adeleye said – B-grade and C-grade office spaces would continue to struggle.
Retail's rebound
Retail real estate, surprisingly, may be Africa's comeback kid.
In addition to lower vacancy rates in the sector, Fiford said, the increased adoption of solar PV is being used to manage operational costs.
'There's a noticeable trend towards the formalisation of the retail sector, with a significant increase in formal retail spaces, especially in urban centres,' Awolaja said.
Urban mixed-use precincts are also reshaping how developers think about retail, according to global real estate agency and consultancy Knight Frank's Africa Report 2024/25.
'The global trend of the live-work-play model is driving demand for mixed-use and community living developments,' the report reads. 'These developments cater to the preferences of modern consumers who seek convenience, accessibility and a sense of community in their retail destinations.'
How does this affect you?
Pension funds and your portfolio: If your retirement savings or investments are tied to large institutional funds, understanding African real estate's risks and returns helps explain their performance and what your fund manager might do next.
Rising rents and relocations: Shifts in investor appetite and infrastructure upgrades (or lack thereof) affect commercial and residential prices.
Your business ambition: For SMMEs and entrepreneurs eyeing cross-border expansion, understanding regional real estate dynamics could make or break your next move.
Policy, politics and property rights: As some governments grow weary of foreign influence and others dangle tax incentives, the outcome shapes how your country and continent is built, sold and owned.
The residential riddle
'You're seeing a lot of interest in residential property across a number of the key markets, affordable residential properties,' Adeleye said, adding that Covid made this market's importance impossible to ignore.
The big bottleneck in this sector is end-user financing.
'High domestic interest rates mean that the end-user finance mortgage [is] available but not very affordable. By the time you're paying 17, 18% on mortgage rates, the affordability thresholds are somewhat eroded,' Adeleye said.
With African office and retail sectors stabilising, residential is becoming the next frontier.
'The traditional real estate segments, such as offices and retail, are kind of taking a bit of a back seat,' he said. 'They're sort of in a holding pattern, for lack of a better word, and then there's a renewed focus and shift to residential.'
Awolaja noted that governments across Africa are focused on addressing the 'significant housing deficit' on the continent to create opportunities for developers in the affordable housing segment.
Warehouses, wires and walkways
Investor appetite in Africa is growing in so-called alternative real estate assets.
'What you saw dominating global investor appetite was retail assets along with commercial office buildings,' Mpanza said. 'What you're now seeing is the advent of more … I don't want to call it alternative, but other segments within commercial real estate.'
Data centres have become important to Africa's digitisation. There are 198 listed data centres across the continent, according to DataCenterMap, with clusters in South Africa, Kenya and Nigeria.
'The growth of the digital economy and online retail is driving a surge in demand for data centres across the continent,' Awolaja said.
Cold storage is also heating up. 'There is a need to build that infrastructure and ensure that food security is a national priority,' Adeleye said.
The African food cold chain logistics market is projected to grow from $9.9-billion (about R177-billion) in 2025 to $14.5-billion (R260–illion) by 2030, according to Mordor Intelligence.
Student accommodation is another hotspot as Africa's young urban population grows.
'In markets like Nigeria and Ghana, you're seeing a growth in educational services,' Adeleye said, partly driven by the entry of international education players.
Kenya stands out as an attractive market for Mpanza, as it goes hand in hand with the continent's best tertiary institutions.
Future projections for the African real estate market are optimistic, Awolaja said, but warned that overcoming challenges relating to affordability, infrastructure and regulatory frameworks is crucial to realising the market's full potential. DM