Pan-African student accommodation booms

Sub-Saharan-Africa’s economic prospects are improving, with a number of macro trends creating an urgent need for better real estate infrastructure. Within this environment, a vital component is student housing and in certain parts of the continent it is set to emerge as an attractive new asset class (similar to the UK and the US).

Philip Hillman, head of student housing for JLL EMEA comments, “There has been an unprecedented increase in the number of student enrolments across sub-Saharan Africa. In the period 2000 to 2014 period, the SSA tertiary gross enrolment ratio rose from 4,3% to 8,2%. This trend, when coupled with a growing tertiary-aged population, suggests that demand for purpose-built student housing should grow rapidly over the medium term.”

Hillman adds, “The global market has evolved and investors now have a greater variety of vehicles and structures at their disposal, with many now available in SSA.  The direct ownership method is currently the most popular, with private developers providing the vast majority of student housing in SSA. Private developers that directly own their developments carry the largest risk but pocket the greatest rewards, as they are in a position to earn the highest yields and rentals that the market can afford.”

Public private partnerships (PPP) and joint ventures also allow for direct ownership in developments and mitigate the risk exposure of owners. The PPP vehicle enables universities to access private funding in a transparent and low-risk manner while keeping their focus on education, preserving debt capacity, and benefitting from the third party’s experience in building facilities in an operationally cheaper and faster manner than universities are capable of doing. Universities in Kenya and Ghana have recently concluded large PPPs agreements for the provision of student housing. South Africa has to date only implemented one.

In more mature markets, like southern Africa, private players with property management experience and the balance sheet to invest could focus proportionally more on converting, upgrading and maintaining existing building stock, provided there is existing infrastructure close to universities in these markets. While in East and West Africa, outside densely populated urban areas, a greater focus needs to be placed on new developments.  There is also a significant need for PPPs across the continent due to the large amount of on-campus development opportunities that are still available.

“There is substantial evidence within the current landscape that the private sector will become progressively more involved, because student housing  projects in SSA are not only viable, but are among the most attractive investments one can make on the continent,” Hillman concludes.

 

 

Office sector is all about ‘agile’ working

While the look ahead will be challenging for the South African property industry as a whole, there are still pockets of opportunity for investors, landlords and tenants, says Tim Cable, director, who now heads up the real estate sector in South Africa for global professional services consultancy, Turner & Townsend.

“With limited growth in the economy, the Reserve Bank in an interest rate hiking cycle, and socio economic and political pressures, our industry will need to look beyond its current operating models and modus operandi to find these opportunities in the market.”

With considerable experience gained managing the programme management office and capital investment plan at Absa/Barclays, Cable has a broad view of the market and a clear understanding of the importance of aligning a business’s real estate strategy.

“Securing greater capital efficiency on projects is at the heart of what we do. In any business, lifecycle costing and operational expenditure is key in delivering a successful real estate solution.”

Commenting further Cable says office space vacancies are on the rise with new developments coming on stream, the competition between landlords is fierce and it’s a tenant market at present.

“This is where Turner & Townsend’s value add comes into its own. We have a unique specialism in high-end fit-out and have undertaken many such projects for the likes of Google, Barclays, Microsoft, Philips, Grant Thornton, Sasol, Chevron and General Electric to mention a few.

“The value of such fit-outs is significant and landlords offering a holistic solution as opposed to competing over a clean white space provide a compelling offer to prospective clients. Our expertise in being able to effect high quality outcomes within tight timeframes, combined with a cost effective solution, makes our contribution significant in the overall supply chain.”

He says the office property market is going to need to be cognisant of the new workplace requirements as buzz words such as agile and collaborative workplace design requirements are incorporated within the traditional open plan floor plates.

“Agile working is all about creating a flexible and productive environment – by creating different working areas within the office a business can ensure employees have complete freedom and flexibility to work where they want, when they want.

“These workplace design requirements will also influence the amount of space that corporates require as many encourage working from home and other innovative methodologies to reduce floor space requirements as they will look to optimise their current portfolios, and exit space which is not necessary.

“Many of our clients are using flexible working environments to increase the headcount allocation to these spaces, so instead of 1:1 desk allocation ratios, these are being increased to 1:2 or 1:5 people per desk. By eliminating desk ownership you create an environment that is more effective and efficient.

“The ratio applied is derived through space utilisation monitoring as in many instances 20-30 percent of the workforce is away from their desks due to meetings, leave, medical reasons and so on. This then provides an opportunity to maximise the floor plate to account for this under-utilisation. Some of our clients are also allowing their staff to work from home one day a week, which creates further opportunities to rationalise the space requirements.

Into emerging markets

A total of six per cent of Attacq’s total assets are in emerging markets, where the company focuses on joint ventures with partners with local expertise while bringing investment and property skills to investments in larger or metropolitan areas.

 

As part of its emerging markets strategy, Attacq holds a 25% shareholding in Atterbury Serbia, which acquired a 33% shareholding in an existing portfolio of seven properties by MPC Properties of which one is still under construction.

 

The value of the total portfolio after the completion of Shoppi Subotica in October 2016 will be about R3,8-billion. An additional 17% was acquired in portfolio by Atterbury Serbia post year end, which increases Attacq’s effective shareholding in the portfolio to 12,5%. The prime portfolio asset is the Usce Shopping Centre, Serbia’s largest mall.

 

In addition, Atterbury Serbia and MPC have contributed a further Euro40-million in equity to undertake retail developments. Opportunities for the deployment of these funds have already been identified.

 

Commercial & Industrial Property News learns that Usce in Belgrade has a gross-lettable area (GLA) of 47 363 square metres (m2), with vacancies currently standing at 1,38%. Attacq holds 8,25% of the development.

 

This asset complements Immo, Kanem, Oaza and Subreal also in Belgrade. Attacq holds an 8,25% shareholding in all of these developments which all have a 0% vacancy.

 

Immo has 8 350 m2 of GLA, Oaza 574 m2 of GLA and Subreal 4 417 m2 of GLA.

 

These are complemented by Shoppi Subotica which offers 9 989 m2 of GLA and also has a 0% vacancy and in which Attacq has an 8,25% shareholding.

 

The company has also invested into five operational malls elsewhere in Africa. Wilken says he is looking forward to future growth in this regard as “currently we feel that this area of Attacq has under-traded somewhat”.

 

Here, its operational portfolio comprises 127 660 m2 of GLA. Vacancies stand at four per cent.

 

He reports continued headwinds in Africa due to the strength in the US dollar and weak commodity prices.

 

Defensive assets include Injeka City Mall, Manda Hill and Accra Mall, while he reports that Attacq will focus on delivering Kumasi and settling West Hills and Achimota, winner of the South African Council of Shopping Centres Award for top shopping centres developed outside of South Africa, managing assets through the cycle and improving liquidity of the portfolio.

 

However, it is Attacq’s performance in the southern tip of Africa in South Africa that continues to set the precedent.

 

The development profit made in the period from Mall of Africa is about R580-million and around R178-million from other developments.

 

This super-regional mall in Waterfall City, which is 80% owned by Attacq, opened at the end of April this year with more than 123 000 visitors on the opening day. The 131 000 m2 mall is already trading above expectations and it is important to note that only two months of trading contributed to Attacq’s June 2016 results.

 

“The mall has been designed to allow for an expansion of 25 000 m2 and we look forward to significant value upliftment in years to come,” says Wilken.

 

“Waterfall remains the jewel in the Attacq crown as a catalyst for regional growth. We are very positive about the way ahead. Following the catalytic momentum created by the opening of the Mall of Africa, Waterfall City is rapidly becoming the favoured destination for beneficial corporate consolidation. Projections show that the Mall of Africa, alone, will attract more than 15-million people per year,” he says.

 

A total of 6% of Attacq’s total assets are in emerging markets, where the company focuses on joint ventures with partners with local expertise while bringing investment and property skills to investments in larger or metropolitan areas.

 

As part of its emerging markets strategy, Attacq holds a 25% shareholding in Atterbury Serbia, which acquired a 33% shareholding in an existing portfolio of seven properties by MPC Properties of which one is still under construction.

 

The value of the total portfolio after the completion of Shoppi Subotica in October 2016 will be about R3,8-billion. An additional 17% was acquired in portfolio by Atterbury Serbia post year end, which increases Attacq’s effective shareholding in the portfolio to 12,5%. The prime portfolio asset is the Usce Shopping Centre, Serbia’s largest mall.

 

In addition, Atterbury Serbia and MPC have contributed a further Euro40-million in equity to undertake retail developments. Opportunities for the deployment of these funds have already been identified.

 

Commercial & Industrial Property News learns that Usce in Belgrade has a gross-lettable area (GLA) of 47 363 square metres (m2), with vacancies currently standing at 1,38%. Attacq holds 8,25% of the development.

 

This asset complements Immo, Kanem, Oaza and Subreal also in Belgrade. Attacq holds an 8,25% shareholding in all of these developments which all have a 0% vacancy.

 

Immo has 8 350 m2 of GLA, Oaza 574 m2 of GLA and Subreal 4 417 m2 of GLA.

 

These are complemented by Shoppi Subotica which offers 9 989 m2 of GLA and also has a 0% vacancy and in which Attacq has an 8,25% shareholding.

 

The company has also invested into five operational malls elsewhere in Africa. Wilken says he is looking forward to future growth in this regard as “currently we feel that this area of Attacq has under-traded somewhat”.

 

Here, its operational portfolio comprises 127 660 m2 of GLA. Vacancies stand at four percent.

 

He reports continued headwinds in Africa due to the strength in the US dollar and weak commodity prices.

 

Defensive assets include Injeka City Mall, Manda Hill and Accra Mall, while he reports that Attacq will focus on delivering Kumasi and settling West Hills and Achimota, winner of the South African Council of Shopping Centres Award for top shopping centres developed outside of South Africa, managing assets through the cycle and improving liquidity of the portfolio.

 

However, it is Attacq’s performance in the southern tip of Africa in South Africa that continues to set the precedent.

 

The development profit made in the period from Mall of Africa is about R580-million and around R178-million from other developments.

 

This super-regional mall in Waterfall City, which is 80% owned by Attacq, opened at the end of April this year with more than 123 000 visitors on the opening day. The 131 000 m2 mall is already trading above expectations and it is important to note that only two months of trading contributed to Attacq’s June 2016 results.

 

“The mall has been designed to allow for an expansion of 25 000 m2 and we look forward to significant value upliftment in years to come,” says Wilken.

 

“Waterfall remains the jewel in the Attacq crown as a catalyst for regional growth. We are very positive about the way ahead. Following the catalytic momentum created by the opening of the Mall of Africa, Waterfall City is rapidly becoming the favoured destination for beneficial corporate consolidation. Projections show that the Mall of Africa, alone, will attract more than 15-million people per year,” he says.

 

Hybrids power ahead

While significant progress has been made in the field of solar photovoltaic rooftop projects, the generator remains the main form of standby power supply on the continent. This is considering the availability of diesel as a fuel source.

 

As Nalen Alwar, projects sales manager for Cummins Power Generation Southern Africa, points out, “A well-established supply chain exists in southern Africa, where diesel-generated power has shown advantages of project simplicity, short project lifecycles, lower capital cost and rapid installation time for power on-stream.”

 

Importantly, diesel generators remain a more cost-effective solution than renewable energy alternatives. The price of PV solar installations still remain the biggest hurdle to the mass roll-out of these projects, despite the growing international move towards decentralised power projects. In South Africa, large property developers have been at the forefront of this move.

 

For example, Growthpoint Properties has already completed the installation of such projects with the capacity to generate over 3,2 megawatts  at seven of its office, retail and industrial properties. They include Cape Town’s V&A Waterfront, The Constantia Village Mall, Bayside Mall and Airport Industria. In addition, the company has identified more than 70 buildings across its portfolio for possible future solar PV installations.

 

Another challenge is the “intermittent” factor associated with renewable energy projects, relying heavily on costly storage systems to ensure electricity supply even when ultraviolet radiation levels are insufficient.

 

This requirement is bypassed by hybrid technologies, combining “grid, PV solar and generators”. Commercial & Industrial Property News is aware of many of these projects now in the early stages of their lifecycle, covering commercial, industrial, health-care, leisure and retail sub-sectors.

 

Alwar says, “Falling crude oil prices have lowered diesel prices and impacted alternative-energy investment drivers. Furthermore, the concept of resilience through hybrid solutions has meant that diesel-generated power has to feature as a relevant component.”

 

These systems allow property developers to enjoy the benefits of free fuel source and, when the sun does not shine, revert to grid power supply, still the most cost-effective source of power generation. The generator serves as the last resort should both sources of supply be unavailable.

 

This is especially the case elsewhere on the continent, where electricity is supply remains extremely limited.

 

Alwar says that instability in stakeholder structures for projects with alternate fuel feedstock, together with decreasing levels in dams and lakes, which has affected the performance output of hydropower plants, has yet again resulted in diesel-generated power being called on as emergency measures in southern Africa.

 

“Diesel power is still the mainstay solution for operational resilience and industrialisation in remote areas. Significant technology improvements have been made towards reduction in capital, operating costs and environmental stewardship,” states Alwar.

Man-made lagoon proves the impossible in Egypt

Building an oasis in the middle of the desert, using salt water from desert wells, was previously impossible, as the land was unusable and had very little commercial value.

The 12,5-hectare lagoon in Sharm El Sheikh, Egypt is the main attraction of the Citystars touristic development, located in the middle of the desert. The lagoon holds the Guinness World Record for the largest man-made lagoon. The project is the outcome of a joint venture between Crystal Lagoons and the Sharbatly family, who are prominent players in the African and Middle Eastern business landscape.

The project is located on a 750-hectare site that features residential units, hotels, golf courses, marinas, museums and a shopping mall. This development was previously unfeasible, due to the challenging terrain, and is now enjoying immense value addition in terms of real estate value.

Salt water from otherwise unusable aquifers in the desert was used to fill the lagoon using Crystal Lagoons’ patented technologies, Commercial & Industrial Property News can report.

The system allows for the construction and maintenance of unlimited-sized bodies of crystal-clear water at a low cost.

The project will be completed in 2017. Much of the development is already in operation, including part of the lagoon in the complex. Crystal Lagoons’ business model is set up to partner with clients by licensing the use of its technology.