Africa has been included for the first time in the 36-year history of advisory firm PwC and nonprofit organisation Urban Land Institute’s 'Emerging Trends in Real Estate 2015' report.

Speaking at a media briefing in Johannesburg, PwC global real estate leader Kees Hage noted that this was owing to many global companies looking to Africa for new opportunities in investment and development, drawn by the 20%-plus returns across many territories.

The report provided insight into the current African real estate sector by focusing on the key markets through a series of interviews with leading players in the industry, who provided their views and outlook on the investment climate.

Some key themes that emerged from the interviews included the listed sector in South Africa, investing in Africa, finance in Africa and the impact of global megatrends.

Interviewees noted that the listed property sector in South Africa showed “excellent performance”, with 26.6% returns. The listed sector in the country demonstrated significant growth and had a current market capitalisation of just over R350-billion. Also speaking at the briefing, PwC Africa real estate leader Ilse French noted that this figure was close to that of Singapore and Hong Kong.

This capatilisation was boosted by an influx of capital following the introduction of real estate investment trust legislation in 2013.

“The main challenge for investors coming in is the liquidity in this sector, with about five stocks being adequately liquid for their requirements.”

Further, unlisted real estate markets were dominated by South African institutions, which also posed challenges.

The report further highlighted the challenges of investing in Africa, stating that the size of available investments did not match the demands of larger institutional investors, who required substantial investment to enter the market.

French noted that attractive investments included those that were upwards of $20-million, which provided opportunities for investors looking for high returns.

Looking at finance in Africa, the report noted that securing finance in South Africa was not viewed as a problem, but it was in other markets. The finance market was found to be dominated by a small number of financial institutions requiring equity investment of up to 50% to secure development capital. This presented opportunities for overseas debt providers to enter the market in support of regionally based developers and investors.

Trends observed by interviewees included the continued impact of urbanisation, with the observation in South Africa that some small towns were being marginalised as large metropolitan areas develop.

Developers were careful about the size and number of retail developments over the short term, with five-year planning horizons providing time for consumer spending habits to develop to keep pace with increasing supply.

Further, the report stated that, in almost all of Africa’s markets, demand for high-quality retail, office and industrial accommodation outstripped supply as international and local occupants responded to improving economic outlooks.

“One of the clear opportunities opening up for investors in sub-Saharan Africa was shopping centre development,” the report stated, adding, however, that there were some concerns in economies that had heavy exposure to the prevailing weak oil price, such as Ghana and Nigeria.

It added that demographic shifts and changes in consumer behaviour were the underlying drivers of demand, encouraging investors from overseas to enter the various markets and participate in the African growth story.

“As real estate investors around the world are faced with the challenges of finding value and returns at a time when core property is becoming overpriced in almost all markets, Africa is now of increasing interest. We believe African real estate has unique drivers for growth,” French said.

The report cited data from a Real Capital Analytics (RCA) report, which stated that sales of large lot-size property across Africa topped $2.17-billion in 2014, of which South Africa accounted for over $2-billion. which RCA suggested could be attributed to other markets being less transparent with data.