East Africa is witnessing a remarkable transformation, with its real estate markets emerging as vibrant investment destinations.

The combination of robust economic growth, infrastructure development, a rising middle-class population, regional integration, and a thriving tourism sector has created an environment conducive to real estate development and investment. 

Positive GDP growth forecasts for Tanzania, Uganda, Rwanda and Kenya support the continued development of a robust commercial real estate economy despite macroeconomic and geopolitical tensions impacting the region.

According to reports, investor appetite in the East African property market seems to support the heightened levels of optimism that points towards emerging asset classes.

Light industries

The industrial sector continues to benefit from an increase in e-commerce, localized storage, and localized manufacturing requirements as producers / manufacturers look to reduce their reliance on internationally manufactured goods.

The asset class has shown resilience, is retaining value and continues to benefit from low vacancies, product innovation and increasing inventory requirements to minimize supply chain disruptions experienced during Covid and prolonged as result of Russia-Ukraine War.

For example, Africa’s demand for packaged medicines is worth $18bn a year, of which only 36 percent is currently produced locally, and only 3 percent of demand is met by Intra-African Trade.

This is just an example of one industry ripe to grow and benefit this asset class.

Light industrial property developments are key to seeing more industries develop in East Africa and present the ideal opportunity for foreign investors looking for new markets. 

Kenya, for example, is targeting investors to establish manufacturing plants in its special economic zones, specifically in electronics, textiles, pharmaceutical, and medical devices, as well as the lift and escalator sectors, leading to an increase in demand dynamics which will benefit rental escalations over the medium term given the emerging nature of the asset class.

Tanzania also has Special Economic Zones and Exports Processing Zones, targeting to attract investors in light industries for export markets, both regional and global.

Data Centres 

Somewhere between US$5-6bn will be invested in carrier neutral data centres in Africa, including EA, over the next 3-5 years, with firm commitments from companies such as Vantage (US$1 billion), Africa Data Centres (US$500m), WIOCC’s Open Access Data Centres (US$500m) and Colo West (US$259m).

The increase in demand for data centres is driven by several factors including the need for global connectivity, hybrid ways-of-work, a growing population, and regulatory pressures to onshore data storage, moving away from dependencies for data storage in North America, Europe, and Asia.

Kenya, one of Africa's primary data centre hubs, is considered the gateway to the East African region and hence a prime location for new developments with Africa Data Centres (ADC) announcing three new projects to be developed. 

The first broke ground in January last year, while plans have started for the development of a second, and land being secured for the third.

Healthcare sector

With economic growth and trade activities continuing to rise in East Africa, there is an increased focus on the provision of healthcare including hospitals, laboratories, pharmacies, and frail-care facilities.

This represents   opportunities for developers in the East African region looking to diversify existing portfolios and consider ways to monetize longer-term debt as they optimise their balance sheets.

Rapid urbanisation 

More opportunities to bring suitable affordable housing products to market will need to be unlocked as urban populations continue to grow. 

Across East Africa, urban population growth estimated at 4.5 percent to 5 percent urbanisation is driving increased housing demand in a market where the affordable housing stock deficit is at 2 million dwellings.

Policymakers are responding to rising inflation by raising interest rates. 

An increase in the development of affordable housing stock is notable and is necessary to address pent up levels of demand given the apparent housing stock deficit.

 “We are also seeing an increased appetite from investors to respond to demand across sectors, and, as a  leading pan-African bank, we remain committed to delivering sustainable funding solutions to our clients that continues to promote economic progress in East Africa,” says Somaya Joshua, the Corporate and Investment Banker, Absa Bank.

“One of the primary catalysts behind the burgeoning real estate markets in East Africa is the region’s impressive economic growth, Joshua says. 

“This economic growth has led to an increase in urbanisation, with a growing number of people migrating to cities in search of employment and better living standards.” 

As a result, the demand for housing, commercial buildings, and infrastructure has soared, creating lucrative opportunities for real estate developers and investors.

Infrastructure Development

East African governments have recognized the importance of infrastructure development in supporting economic growth and attracting investments. 

As a result, substantial investments have been made in transportation networks, including roads, ports, railways, and airports, improving connectivity within and between countries. 

These infrastructure projects are enhancing accessibility to previously untapped regions, thus opening up new areas for real estate development. 

The construction of highways, such as the Northern Corridor and the Standard Gauge Railway, is connecting major cities and stimulating urban growth along these corridors.

Increasing middle-class 

The emergence of a thriving middle class in East Africa has been a significant factor driving the demand for real estate. 

A growing number of individuals with higher incomes are seeking modern, affordable housing options, as well as commercial spaces to support their businesses. 

Developers have responded to this demand by creating residential complexes, shopping malls, and mixed-use developments to cater to the needs and aspirations of the expanding middle-class population. 

The rise in disposable income has also fueled the demand for luxury properties, leading to the development of high-end residential and hospitality projects.

Regional integration, FDIs

East African countries are actively engaged in regional integration efforts, such as the East African Community (EAC) and the African Continental Free Trade Area (AfCFTA). 

These initiatives promote cross-border trade, investment, and economic cooperation, facilitating the flow of capital and stimulating real estate development. 

Foreign direct investment (FDI) in the region has been steadily increasing, with international companies recognising the potential of East Africa’s growing economies. 

This influx of foreign capital has contributed to the expansion of the real estate sector, attracting developers and investors from around the globe.

Tourism and hospitality

East Africa’s abundant natural beauty, wildlife, and cultural heritage make it a popular tourist destination. The tourism sector has experienced significant growth in recent years, driving the demand for hospitality infrastructure. 

The development of hotels, resorts, and eco-lodges has been on the rise to accommodate the increasing number of tourists. 

Additionally, the growth of international conferences, events, and exhibitions in cities like Dar es Salaam, Nairobi and Kigali has created a need for modern convention centers and business hotels, presenting lucrative opportunities for real estate investors.