With Africa being referred to as the last investment frontier, and its growing, underserviced consumer class gaining the attention of foreign retail companies, the continent has seen an increase in demand for formal retail infrastructure and office space.
For commercial property developers and investors, the potential for returns can be huge in Africa. However, the sector is not without its challenges. Leonard Michau, head of Africa operations for commercial property services group Broll, outlined a number of challenges facing property management, development and leasing in African countries.
South African-based Broll entered Nigeria in 2004 and has nine years’ experience in the commercial property services sector in sub-Saharan Africa.
“I think that certainly one of the biggest challenges is the depth of skilled and experienced staff that is lacking,” said Michau. “There are certainly pockets of excellence, I have to emphasise that, but you will find that in the case of retail management, facilities management or corporate advisory, you will definitely find that there is not that depth of skills or experience.”
He added that local service providers, such as a company that maintains office elevators, offer a service that is not always up to international standards, although “over the last couple of years there has been a definite improvement in terms of standards and quality”, he acknowledged.
Another area that can be limiting is the legal system. “I’m not saying it doesn’t work, but it can be extremely slow and therefore there is a tendency to try avoiding going to courts,” he added. “You can be strung out for many years so that can be a challenge in terms of arrears.”
According to Michau, the facilities management requirements can also be “extremely onerous” in African countries outside of South Africa. For example, many developments will have their own purification works, sewerage purification plants, generators, water tanks and pumps on site, which places extra responsibility on the managing agent to maintain that equipment.
Another challenge can be the use of multiple currencies when it comes to billing and financial reporting. “People take it for granted but often you will bill a tenant in dollars but report in a different currency and some tenants want to be billed in local currency while other tenants want to be billed in dollars.”
In terms of leasing, Michau said there can be high expectations from landlords and onerous lease terms, particularly in the retail sector, where there is a lack of comparative information. In addition, it can be difficult to find quality retailers and country franchisees with the necessary experience and balance sheets. – Made It In Africa
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