Unlocking sustainable real estate performance and value

Until recently, real estate development in Africa had primarily focused on greenfield projects. However, as the markets mature, there is a significant shift toward refurbishing and redeveloping existing buildings or precincts.

Cities like Casablanca, Abidjan, Cape Town, and Lagos have seen a consistent increase in real estate supply in recent years. This has resulted in a competitive market with pricing tensions, leading to a preference for higher quality and environmentally friendly properties. In response to these new tenant-friendly conditions, landlords are now paying more attention than ever to building performance, operations, and maintenance.

Another driver of this trend is the increased awareness of the environmental challenges facing African cities. Refurbishing existing properties and redeveloping brownfield sites have lower environmental impact compared to new greenfield developments when done conscientiously.

With the increasing environmental challenges posed by new developments, building owners are reconsidering their investments. They have become more conscious of the need to prolong the lifespan of their real estate portfolio by exploring repositioning, repurposing, or redeveloping strategies to create additional value for their properties.

Depending on the age, condition, and relevance of a particular asset to the prevailing market conditions and context, the extent of the work can range from a minor upgrade of the building or refreshed services to full stripping of the building to a bare structure, while replacing or revamping the rest. In some cases, the redevelopment may also involve structural alterations.

Combining the demand for tenant-friendly buildings, with potential premium rents between 7% and 12%, and the environmental benefits of redevelopment, building owners in Africa are finding profitable returns on investment. This financial incentive is expected to drive a wave of refurbishment and redevelopment initiatives throughout the continent in the next five years.

Furthermore, advancements in construction technology are making it easier to accurately assess the building condition, plan the refurbishment process, visualize the outcome, estimate costs, manage construction, and enhance collaboration among project teams.

For example, when as-built drawings are no longer accessible or accurate, laser scanning technologies and Building Information Modelling (BIM) provide an accurate 3D representation of the existing structure, façade, and services. This allows for a detailed assessment of its condition and provides the design platform to work with. This results in an efficient and informed process, with reduced redevelopment risks and improved outcomes. 

The improved connectivity is creating more instances where technology aids in project regeneration, through interconnected devices and data analytics that streamline decision-making and implementation. This includes the use of IoT for data collection prior to project regeneration, to understand how the building is being utilized and how this could be improved. Additionally, AI-connected drones can efficiently and accurately estimate progress on site, while other connected devices like wearable tech such as hard hats can improve workers' safety and reduce incidents on more risky tasks.

Several major refurbishment projects undertaken across Africa involve a change of use or an upgrade, as older buildings are no longer fit for purpose in the face of competition from newer and higher-quality developments.

A great example of adaptive reuse is the Jamaa El Fna heritage museum in Morocco. Formerly the headquarters of Bank Al-Maghrib, it has been restored and transformed into a museum. Another notable redevelopment is the Christian Barnard Memorial Hospital in Cape Town, which is will be converted into a vibrant mixed-use development comprising of hotels, retail, office space, and residential units.

The conversion and refurbishment of existing buildings in Africa's leading cities reflect a broader macro-level change in urban form. Such projects offer higher levels of sustainability and create a 'vacuum effect', freeing up space in older buildings for new tenants; or resulting in a ‘brown discount’ on rents of older properties creating opportunities for their conversion to alternative uses.

City governments in African cities are acknowledging the importance of stricter planning and zoning regulations to create more sustainable and attractive urban environments. Even the mindset of developers, investors and city planners is changing. They are increasingly recognising that redeveloping existing buildings and brownfield sites offers an opportunity to create more spacious, attractive and sustainable urban landscapes.

In the past, demolishing old buildings and developing new ones in greenfield locations was the norm across most African cities. With more than 80% of office buildings existing today expected to still be in use by 2050, this way of thinking is now being replaced by a new mindset focused on converting, refurbishing and restoring the existing stock to meet the requirements of the future marketplace. 

Nevertheless, we are still in the early stages of this transition, and there is a steep learning curve that lies ahead for all parties involved. We have witnessed the success of redevelopment initiatives in mature real estate markets which indicates the potential for both quality premiums for tenants, financial gains for building owners and environmental benefits for the planet.

Over the next ten years, Africa is expected to witness a greater emphasis on refurbishment and sprucing up existing buildings rather than new developments. City governments and building owners, quick to respond to this trend, will likely enjoy financial rewards while creating an urban environment in African real estate.