Technology and shifting populations are changing the economics of Johannesburg’s — and sub-Saharan Africa’s — real estate markets, IndependentOnline reports.
The South African government made a R110-billion ($10.28 billion) commitment towards infrastructure in Johannesburg over the next decade, and it may not be enough, the report said.
Ilse French is head of asset management and real estate for Africa at professional services company PricewaterhouseCoopers. PwC this week released a report, “Real Estate 2020: Building the future.”
Gauteng’s population is set to double from 11 million today to 22 million by 2030 if current trends continue, French said. This is in line with global increases: by 2050 the global urban population will increase by 75 percent to 6.3 billion and there will be a huge expansion in cities, with mixed consequences.
The pace of urbanization — people moving from rural areas to cities — in sub-Saharan Africa is forecast to be second only to Asia’s.
French said these shifts in population will drive changes in property demand, with technology also changing the economics in the real estate sectors.
The need for physical office and retail space is decreasing due to telecommuting, digital
technology and satellite offices, French said. Certain stores will always remain relevant in brick-and-mortar form, but others will be heavily affected by online commerce.
The growing population will need more food, resulting in a need for agricultural land, but less than 13 percent of South Africa’s land is suitable for agriculture, French said.
The real estate industry is at the center of rapid economic and social change that is transforming the built environment, said Kees Hage, global real estate leader at PwC.
The growing middle class and ageing populations in emerging economies are
increasingly demanding specific types of property such as affordable housing, retirement
homes, gated communities outside cities for families and small urban apartments
without kitchens or parking spaces for young professionals.
The real estate market is traditionally slow to respond to market changes, Hage said. “As real estate is a business with long development cycles, now is the time to plan for these
changes,” he said.
Property managers will need to respond and adapt, Hage said. They need to understand the underlying economics of cities, factor technology and sustainability into asset valuations, collaborate with governments to enable economic and social progress, decide where and how to compete and assess opportunities to reflect a broader range of risks, IndependentOnline reports.
Global property output is expected to almost double from $7 trillion in 2012 to $15 trillion by 2025 but the philosophy of “build it and they will come” will not prove universally successful, Hage said.
