Despite a number of global headwinds, when risks are successfully managed a number of emerging markets in Africa continue to present opportunities and remain attractive to occupiers and investors alike, according to new research published today by Cushman & Wakefield.
The third edition of the Emerging & Frontier Markets report includes a risk index ranking of countries and discusses how over the past 20 years the core of the global economy has shifted as investors target higher rates of return in developing economies. These markets also have become increasingly attractive to occupiers who may have struggled with stagnation in more mature locations.
A growing middle class population, better infrastructure and technological improvements in a number of countries possessing transparent real estate markets have led to Africa securing half of the top 10 most attractive emerging market locations, according to the report.
The 2015 Risk Index results reveal that Botswana retains its position as the most attractive market for occupiers with other African states including South Africa, Ghana, Morocco and Tunisia also featuring in the top 10. Meanwhile, it is important to remember the diversity of the African markets with Angola, the Democratic Republic of Congo, Zimbabwe and Nigeria perceived to carry greater risk.
In the Americas, Uruguay, Argentina and El Salvador have risen considerably with Mexico just outside the top 10. A trend of slowing economies following rapid growth and stable rents in the next 12 months is providing opportunities for corporates.
Despite Southeast Asia being one of the fastest growing regions in the world with the VIPs (Vietnam, Indonesia and Philippines) performing very well from an overall economic perspective, all three countries have slipped slightly down the rankings, with ease of property ownership creating issues in Vietnam and the Philippines while Indonesia has higher costs for registering property. Despite this, these locations are significant growth markets for a number of industries.
“Due to a number of global economic shocks throughout the past 18 months, risks are rising in certain emerging markets,” said Steve Quick, Cushman & Wakefield Chief Executive of Global Occupier Services. “At times of uncertainty, real estate portfolio strategies come under close review, and the Emerging Markets Risk Index helps identify opportunistic locations for occupiers.
“As emerging markets become increasingly integrated into the global economy it is important to remember the sheer size and diversity of developing economies,” Mr. Quick continued. “Emerging markets are often mistakenly viewed as homogenous. However, in reality, real estate dynamics vary considerably as do the sets of risks and opportunities for occupiers across differing geographies and business sectors. Africa is a good example of this, with countries offering very different operational profiles. Real estate strategies need to reflect this.”
The Risk Index considers the threats and opportunities across the globe for corporates targeting real estate from both an expansion or relocation perspective and provides insights into which markets possess the strongest prospects for occupiers throughout 2016.
While a number of macroeconomic and political global shocks such as fluctuating commodity prices, financial turbulence and policy bottlenecks were created in the BRIC economies of Brazil, Russia, India and China, they are now also carrying implications for emerging markets. The BRIC economies are excluded from the Index as they are considered to be more mature locations.
The report also looks at emerging markets from a more micro perspective. Through a survey of “best in class” property operators, local challenges surrounding accessibility of real estate were scored on a country by country basis.
Factors considered include:
Overall transparency of property market
Ease of commercial property ownership for foreign companies
Ease of leasing space for foreign companies
Speed of transaction conclusion