Covid-19 Provides an Opportunity for East Africa’s Property Sector to Reset

Pannel discussion in the 2019 East African Property Investment Summit.

In a first for Africa, The East Africa Property Investment (EAPI) Virtual Summit (29 & 30 July) featured 69 regional and international speakers, providing tangible insights on how the property sector has weathered the Covid-19 pandemic, and what the future holds for the sector.

Driven by the theme ‘Think Different’ and with more than 1,000 delegates attending from over 35 countries, the virtual conference has presented evidence that the East African real estate sector remains attractive to international, local and regional developers and investors, said EAPI Virtual’s host, Kfir Rusin.

“The benefit of an online conference is we have been able to gather the leading regional and international real estate figures active in the region to provide their perspectives and get the industry to Think Different and ensure it emerges on a stronger footing post Covid-19,” said Rusin.  

The real estate sector was under pressure pre-pandemic, but the virus had highlighted the resilience of many of its sub-sectors as well as its future opportunities.

“The pandemic has exposed vulnerabilities in certain sub-sectors, such as hospitality, retail and offices, while highlighting the resilience of warehousing and logistics and the future opportunities in healthcare facilities, data centres and technology services,” said Rusin.  

Gerhard Zeelie, Divisional Executive: Commercial Property Finance Africa – Nedbank CIB, South Africa, a noted financier in the region, said Covid-19 had revealed strengths and weaknesses of the East African property sector, but saw Nedbank remaining cautious on the long-term impact of the pandemic.

“It is too early to make a call. We have seen fewer clients discussing new development opportunities with us, which indicates to me that everybody is adopting a cautious approach.  I also think that this is smart. We are seeing how the pandemic is impacting our day-to-day lives, but it is too early to speculate on how it will impact the next three to five years,” said Zeelie.

He added that from a project financing perspective there has been a general slowdown, with the sector likely to pick up in the next 12-18 months with potential for sales and acquisitions and a renewed emphasis on flexibility in how future deals will be financed.

“Pre Covid-19 capital structures had to be cheap, previously investors were only looking for the cheapest funding, which was not always the most flexible. Now, capital structures must be flexible to be able to withstand some uncertainty in the asset’s performance without resulting in time and costs wasted to restructure the capital structure. I think that will be the biggest change,” said Zeelie.  

According to Ben Woodhams, the Managing Director of Knight Frank Kenya, Covid-19 has provided an opportunity for the sector to reset, with underlying supply and demand challenges that the industry needs to address having been exacerbated by the pandemic.

“The Covid-19 pandemic has provided an opportunity for the sector to reset itself. However, it’s important to remember that a slowdown in development will not result in a supply and demand equilibrium, as Covid-19 has exacerbated the demand/supply mismatch, and so it will take longer to settle than if the pandemic had not occurred.”

Sharing Rusin’s view that the pandemic has emphasised the demand and resilience of new sub-sectors, there also remains a strong case for flexible working solutions, said Woodhams.

“Yes, the pandemic has emphasised the need for logistics and flexible workspace solutions. Our view is that logistics will bounce back quickest and have proved to be resilient and when normality resumes, we expect a lot of activity in this sector. While serviced offices have been hit very hard, we expect that they will also recover very quickly as businesses look for more flexible office solutions,” he said.