by Dr. Bekithemba Mpofu PhD MBA MSc BSc FCMI CBIFM Future of Real Estate business in an evolving and challenging African environment by Dr. Bekithemba Mpofu PhD MBA MSc BSc FCMI CBIFM Senior Lecturer in Real Estate Investment, Finance and Economics

Main sources World Economic Forum (2016) Environmental Sustainability Principles for the Real Estate Industry PwC (2014) Real Estate 2020, Building the future Prudential Real Estate Investors (2012) A birds Eye View od Global Real Estate Markets: 2012 update EY (2016) Global Market Outlook: Trends in real estate private equity Bennet Kpentey (2017) RICS Keynote speech: African economic outlook United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, Highlights Ian Palmer (2017) Land and infrastructure in African cities, RICS Conference

Opportunities Technology Young population Urbanization Population Growth Urbanization Sustainability PROJECTED ECONOMIC GROWTH Funding opportunities Infrastructure Gap Technology

Africa’s demographic trajectory (Ian Palmer)

Urban and rural population of the world, 1950–2050 Source: UN, DESAP Division (2014)

Urbanization statistics Urban population to increase to over 6.3billion by 2050 (75%) 1950 (30%), 2014 (54%), 2050 (70%) in urban areas Global construction to double to US$15trillion in 2025 compared to 2012 Asia fasted growing followed by SSA

Urban and rural population as proportion of total population, 1950–2050 Source: UN, DESAP Division (2014)

Median age by region (PwC)

Youthful African population Compared to the rest of the world Africa will have a workforce asset come 2050 Over 60 will exceed under 15, thus calling for specialist real estate Also aging population will limit house prices Increase in population and aging will lead to several subsectors Affordable housing, Healthcare, Agriculture, retirement homes etc Increase in young middle class, will increase demand for real estate

Africa’s growth by region, 2014-17

Economic growth Real estate integral part of growth When a country is doing well, there is pressure for the government to invest in infrastructure By 2025, Nigeria will need 20 million new homes According to AFDB by 2060, about 1.1 billion Africans will be in the middle class thus increase

Key urban development drivers Source: African Centre for Cities and DfID – using Oxford Economics data

Infrastructure gap US$93 billion required annually over the next 10 years to address its infrastructure gap in SSA Africa currently has an annual financing gap of over US$50 billion GDP growth is reduced by 2% annually due to poor infrastructure and productivity by as much as 40% annually

Technology It can be an enabler of real estate business but also a disruption Online shopping calls for a shift in traditional spaces especially for the digital generation Agile working enabled by technology supports working from home and satellite offices As an enabler, technology helps real estate given its heavy reliance on data management

Funding Basel III and US Dodd-Frank regulations, reduces banks and insurers’ direct involvement in real estate funding EU Solvency II Directive reduces the ability of European insurers to invest Private capital and innovative funding options need to be developed RE managers to place a central role in the financial ecosystem.

Real estate’s contribution to energy use and CO2 emission Source: Accenture (adapted from IPCC, USBC, EC)

Sustainability By 2030, world population will need: 50% more energy 40% more water 35% more food UN Climate Change Conference (COP21), Paris 12/15 agreed: Keep global warming below 2degrees To stay under 2degrees, RE requires stringent targets World Bank, 36% reduction in total CO2 emissions in RE required by 2030

Green premium Prime real estate now reflect building’s sustainability credentials through green premium in advanced economies Challenge for RE managers is large brown discounts

Threats Politics stability Sufficiently skilled professionals Corruption Funding Intercity competition Government policies Infrastructure Gap Urbanization Politics stability

Strategies Collaborate with government Joint ventures Factor technology & and and sustainability Pursue framework contracts and long-term relationships

Strategies…… continued: Specialisation Subsector specialisation Urban economic analysis Deal structuring Asset value management Product development

THANK YOU!