Flexible Leasing Models Reshape Africa’s Commercial Property Market

 

Executive Summary

The Africa commercial real estate leasing market is poised for robust growth, driven by rapid urbanization, increasing foreign direct investment (FDI), and the expansion of multinational corporations across key cities. Valued at USD 958.55 billion in 2023, the market is projected to reach USD 1,309.21 billion by 2031, reflecting a compound annual growth rate (CAGR) of over 4.1% . This growth is underpinned by the rising demand for office spaces, retail centers, industrial facilities, and the adoption of flexible leasing models.

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Africa Commercial Real Estate Leasing Market Dynamics

Growth Drivers

  • Urbanization & Infrastructure Development: Africa's urban population is projected to exceed 1.1 billion by 2040, significantly increasing the demand for commercial properties .
  • Foreign Direct Investment (FDI): The real estate sector is attracting substantial FDI, particularly in high-growth economies like Kenya, Ghana, and Nigeria.
  • Expansion of Multinational Corporations (MNCs): Global companies are establishing regional headquarters in African cities, increasing demand for office space leasing.
  • Flexible Leasing Trends: The rise of co-working spaces, build-to-suit leasing models, and digital leasing services is reshaping the leasing landscape.
  • E-commerce Boom: The rapid growth of online retail and last-mile delivery services is driving demand for logistics hubs and industrial warehouses.

Challenges

  • Regulatory & Economic Barriers: Unclear property laws, economic instability, and infrastructure deficits create hurdles for investors.
  • Affordability Concerns: High lease costs in prime locations remain a challenge for SMEs and startups.
  • Sustainability Demands: With increasing emphasis on green buildings, developers must integrate eco-friendly materials and energy-efficient designs.

 

Segmental Analysis

By Property Type

  • Office Space: Demand for premium office spaces is increasing in business hubs such as Nairobi, Johannesburg, and Accra.
  • Retail Space: Shopping malls and retail outlets are expanding in response to growing consumer markets.
  • Industrial Space: Warehousing, logistics hubs, and distribution centers dominate due to e-commerce and supply chain expansion.

By Lease Type

  • Gross Lease: Tenants pay a fixed rent, with the landlord covering all property expenses.
  • Net Lease: Tenants are responsible for some or all property expenses in addition to rent.
  • Modified Gross Lease: A hybrid approach where expenses are shared between landlord and tenant.
  • Percentage Lease: Rent is based on a percentage of the tenant's sales, common in retail leasing.

By Property Grades

  • Prime Properties: High-quality buildings in prime locations, attracting multinational tenants.
  • C Grade Properties: Older buildings with basic amenities, often in less desirable locations.

By Contract Duration

  • Short-term Leasing: Flexible leases catering to startups and temporary projects.
  • Medium-term Leasing: Standard leases ranging from 3 to 5 years.
  • Long-term Leasing: Major firms and MNCs prefer this for stability and strategic growth.

By End-Use Industry

  • Logistics & Transportation: The largest segment, valued at USD 209.56 billion in 2024, driven by e-commerce expansion .
  • Retail & Manufacturing: Increasing demand for warehouses and industrial parks.
  • Finance & Insurance: Office space demand is increasing in financial hubs like Lagos and Nairobi.
  • Healthcare & Education: Medical offices and private universities are expanding, fueling leasing demand.

 

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Regional Insights

Ghana

  • Market Value (2024): USD 161.17 billion.
  • CAGR: 4.4%.
  • Key Cities: Accra, Kumasi.
  • Growth Factors: Government-led infrastructure projects, increasing middle-class incomes, and rising retail leasing.

Kenya

  • Market Value (2024): USD 304.69 billion.
  • CAGR: 4.7%.
  • Key Cities: Nairobi, Mombasa.
  • Growth Factors: Expansion of multinational corporations and logistics hubs.

South Africa

  • Trends: Hybrid work models are reshaping office demand, with businesses opting for smaller, high-quality spaces. The industrial property sector remains resilient, driven by e-commerce and logistics. Retail is adapting through experiential offerings and omnichannel strategies

 

Competitive Landscape

The Africa commercial real estate leasing market is highly competitive, with major players focusing on strategic partnerships, innovative leasing models, and technology-driven property management.

Key Market Players

  • Broll Ghana
  • Jones Lang LaSalle (JLL)
  • CBRE
  • Goldkey Properties
  • Knight Frank
  • Regus Group
  • Seeff Mozambique
  • HassConsult
  • African Land
  • Atterbury Ghana

Notable Developments

  • May 2023: JLL partnered with an African real estate fund to develop a high-tech logistics park in Nairobi.
  • August 2023: Broll Ghana expanded its property management services in Accra and Kumasi.
  • November 2023: CBRE launched an investment platform targeting West Africa’s retail and mixed-use developments .

 

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Future Outlook

The Africa commercial real estate leasing market is poised for continued expansion, driven by technological innovation, sustainable development, and increased foreign investment. With governments and private developers focusing on smart cities, mixed-use properties, and digital leasing solutions, the sector presents immense opportunities for investors.

 

Strategic Recommendations

  • Embrace Technology: Invest in AI-driven property management, IoT-enabled smart buildings, and blockchain-based leasing contracts to enhance transparency and efficiency.
  • Focus on Sustainability: Develop eco-friendly buildings with energy-efficient designs to meet the growing demand for green real estate.
  • Flexible Leasing Models: Offer build-to-suit and co-working spaces to cater to diverse tenant needs.
  • Public-Private Partnerships: Collaborate with governments to develop commercial hubs and mixed-use properties.

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