August 3 2018

Zambian investors pump money in real estate

Source: Asoko Insight

Zambia’a pension funds and insurance companies have invested $445m and local developers have invested $80m in new property developments between 2014 and 2017, according to Urban Africa Property Group.

“There is a lot more local and international money in Zambia’s property market than people think,” Carl Johan Collet, Managing Partner of Urban Africa Property Group, said.

“Between 2014 and 2017, we have tracked more than $1.3bn in direct investment into the Zambian property market,” he said.

The lion share of this investment has been by Foreign Direct Investments (FDIs) predominantly into cash flow generating properties with Lusaka’s retail sector by far the largest recipient.

“We have tracked more than $715m in FDI with 74.6% invested into Lusaka and the remainder into the Copperbelt region and Livingstone,” he said.

Having spent four years tracking foreign and local investment into Zambia commercial real estate, the money invested by international and domestic institutional investors into different sectors certainly paints a bullish and distinct picture of the country’s real estate market, according to Collet.

The majority of FDI he said, 56% to be exact has gone into “cash flow generating properties”, while 44% have gone into the development.

“Retail is by far the most popular asset class with 64% of the investment while office, hospitality and residential has each received 10-13%”, respectively, of funds, invested,” said Collet.

While the continued investment into Zambia’s retail sector has called for some developers and retailers warning of a rapid saturation in the sector, Bonna Kashinga, Partner, Chief Finance & Operations Executive at Urban Africa Real Estate Group, pointed out that the market still has more room to grow.

“We now have 41 supermarkets in Lusaka alone, 81 across the country when 15-years ago there were only five,” he said.

Such rapid growth in such a short period has helped the industry thrive and has led to the continued push into retail, which Kashinga believes will continue.

“There has been massive growth, but Zambia can comfortably accommodate 300 grocery stores and its why the big five retailers want to build 30 per year,” said Kashinga.

For Collet, the growth in the retail sector and investment has highlighted distinct trends in appetite between local investors and international investors.

“As a local developer in the retail sector, we have noticed that 5,000 sqm below $8m is optimum for the local pension funds. Also, the internationals only want to buy at $20m and up,” he said.

Assets valued in between these figures are struggling to attract buyers, according to Collet: “Zambia is intriguing, and in our research, we’ve begun to call this the dead zone.”

“The Zambian market is dynamic, and our purpose in releasing this first report is to create transparency in the market and encourage others to share their information, which we believe will result in more investment,” he said.