PETER WELBORN THE AFRICA OPPORTUNITY API CONFERENCE 2016
Africa: the growth 1continent
AFRICA S POPULATION GROWTH Africa has the fastest population growth of any global region. Africa s population has more than doubled since 1980 to stand at over 1 billion. UN forecasts suggest that the population of Africa will reach 2 billion by 2050 and 4 billion by 2100. Nigeria is expected to overtake the USA as the 3 rd most populous country in the world by 2050. Population (billions) Population (millions) 6 5 4 3 2 1 0 500 400 300 200 100 0 Global population forecasts Africa Asia Europe Latin America and the Caribbean Northern America Oceania Sub-Saharan Africa population forecasts 2015 2050 Source: United Nations Population Division
AFRICA S GROWTH CITIES Sub-Saharan Africa is home to many of the fastest growing cities in the world. UN projections indicate that the populations of cities such as Nairobi and Dar es Salaam will grow by over 70% in the 2010-2025 period. Although only 40% of Africa s population currently lives in cities, this is expected to rise to over 60% by 2050. Source: United Nations Population Division
AFRICA: ECONOMIC TRENDS Sub-Saharan Africa has averaged GDP growth of more than 5% p.a. over the last decade. GDP growth slowed to 3.4% in 2015, largely due to falling commodity prices. Growth of around 3.0% is forecast for 2016. However, there are wide variations in current growth rates oil exporters have been hardest hit, but oil importers have benefited from cheaper oil. % % 7 6 5 4 3 2 1 0 10 8 6 4 2 0 Sub-Saharan Africa GDP growth rates Sub-Saharan Africa GDP growth forecasts, 2016 Oil-importing countries (exc. South Africa) Sub-Saharan Africa Oil-exporting countries South Africa Source: International Monetary Fund
AFRICA: TRADE TRENDS Africa accounts for only around 3% of global trade, although its share has been gradually rising over the long term. % 50 40 30 20 10 African imports by region of origin Asia EU Intra-Africa North America Others Asia s importance as a trading partner with Africa has steadily grown; more than 40% of imports to Africa come from Asia and around one-third of African exports are to Asia. % 0 50 40 30 20 10 African exports by region Asia EU Intra-Africa North America Others 0 Source: International Trade Centre, Knight Frank
2Investment hotspots
INVESTMENT HOTSPOTS: RETAIL Sub-Saharan Africa is experiencing a wave of modern shopping centre development. This trend is underpinned by Africa s population growth and its growing consumer classes. Despite recent development, many cities remain extremely undersupplied by international standards. Source: Knight Frank, Shop Africa 2016
INVESTMENT HOTSPOTS: PORTS Around 90% of Africa s trade happens by sea, making its ports crucial points in transport and logistics networks. Numerous port development projects are proposed or under construction across Sub-Saharan Africa. Logistics property developers will target sites close to Africa s growing ports. Source: Knight Frank, Logistics Africa 2016
3Who s investing in Africa?
AFRICA: THE WAVE OF CAPITAL
SOVEREIGN WEALTH FUNDS Sovereign wealth funds are state-owned investment funds that typically have long long-term investment horizons. SWFs that have entered African markets include ADIA and GIC. Fund Country Assets under management Government Pension Fund Global Geographical focus Route(s) to Market Real estate allocation Norway US$873 bn Global Direct Up to 7% Abu Dhabi Investment Authority UAE US$773 bn Global Direct, Listed, Private Real Estate Funds 5-10% China Investment Corporation China US$650 bn Global Direct, Listed, Private Real Estate Funds Kuwait Investment Authority Kuwait US$592 bn Global Direct, Listed, Private Real Estate Funds GIC Singapore US$344 bn Global Direct, Listed, Private Real Estate Funds Up to 10% Not published 9-13% Qatar Investment Authority Qatar US$256 bn Global Direct, Private Real Estate Funds Not published Source: Preqin, Sovereign Wealth Institute
DEBORAH WATT THE INVESTMENT CASE FOR EUROPE API CONFERENCE 2016
European Investment 4Why, How and Where
WHY EUROPE? Europe Big, Diverse Market Place Transparency Risk Adjusted Returns All Property Total Returns (% pa) 25.0 15.0 5.0-5.0-15.0-25.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 South Africa Pan-European Average UK Source: MSCI
EUROPEAN CURRENCY, GROWTH & DEMAND Currency Fluctuations GDP Growth Population Growth 90 80 70 60 Population (millions) 50 40 30 20 Poland Germany UK 10 0 Forecast 1950 1958 1966 1974 1982 1990 1998 2006 2014 2022 2030 2038 2046 2054 2062 2070 2078 2086 2094 Source: UN
COMMERCIAL PROPERTY & PRICING Big market - $2.4 trillion/ South Africa $33bn. Largest single market UK - $707bn. International capital flows. Liquidity, diversification & opportunity. 100% 90% 80% Sector Share of Investible Universe European Inbound Capital H2 2014-H1 2016(%) USA UK Germany France Canada Qatar Switzerland Sweden 70% 60% 50% 40% 30% 20% 10% 0% Austria Belgium Denmark Czech Republic Finland France Germany Hungary Ireland Italy Netherlands Norway Poland Portugal South Africa Spain Sweden Switzerland UK Pan-Europe Other Industrial Office Retail Source: Real Capital Analytics, MSCI
RECENT AFRICAN INVESTMENT UK Germany Poland Direct Investment by African Investors (H2 2014-H1 2016) Source: Real Capital Analytics
PRICING Low yields, low interest rates, low 10yr bond yields Yield gap European Office Yields & Risk Premium (%) 7.00 6.50 European City Office Yields (%) 6.00 5.50 5.00 4.50 4.00 Paris Frankfurt Milan Madrid Amsterdam 3.50 London 3.00 H1 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 Source: Knight Frank
RETAIL & INDUSTRIAL More income yield, less volatility Retail structural change 14.00 12.00 10.00 8.00 6.00 4.00 2.00 European Retail Yields (%) 14.00 European Industrial Yields (%) Brussels 12.00 Prague 10.00 Paris 8.00 Berlin 6.00 Munich Dublin 4.00 Milan 2.00 Brussels Prague Berlin Munich Budapest Dublin Milan 0.00 Warsaw 0.00 Warsaw H1 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 Madrid H1 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 Madrid Source: Knight Frank
DEALS & HOTSPOTS London, UK Office Tenant: KPMG 9 years 97m /NIY 3.77% Leeds, UK Office Tenant: Addleshaw Goddard 17.5 years 43.75m /NIY 5.42%
DEALS & HOTSPOTS Logistics Portfolio, Germany Logistics Tenant: DHL 8 years EUR 188m / GIY 6.75% Office Portfolio, Netherlands Offices Tenant: Multiple 6 years + EUR 382.7m / GIY: 7.12%
DEALS & HOTSPOTS
EUROPEAN RESEARCH