Nigeria’s REIT market, though still in its early stages, is gaining investor attention as rapid urbanisation and a growing population drive demand for income-generating real estate, according to a Knight Frank Real Estate report.
The report indicated that Real Estate Investment Trusts have emerged as a transformative investment vehicle globally, allowing investors to access real estate markets without the challenges of direct property ownership. In Africa, REITs are gaining momentum, driven by urbanisation, population growth, and the need for diversified investment opportunities.
It stated, “The African REIT market remains underdeveloped compared to global standards, however, presenting both challenges and opportunities for growth. This article explores the size of the African REIT market, key countries and players, emerging trends, and where investors can focus on future opportunities.
“The global REIT market is valued at approximately US$4tn, with the United States accounting for nearly 80 per cent of this total, equating to around US$3.2tn.
The African REIT market represents a small fraction of the global market, with South Africa leading the continent, boasting a market capitalisation exceeding US$ 20 bn (CAHF). Despite its modest size, the African REIT market has grown steadily over the past decade, with South Africa, Nigeria, and Kenya making significant contributions.
“Nigeria’s REIT market is still emerging but holds significant potential due to its large population and rapid urbanisation,” the report further stated.
The report disclosed that South Africa dominates the African REIT market, with a market capitalisation of approximately $8.5 bn. Nigeria and Kenya follow, with market capitalisations of $600m and $300m, respectively, in spite of regulations being established at the same time. Other countries, such as Ghana, Morocco, and Egypt, are beginning to explore the market and have legislation in place but are yet to establish any actual REITs.
It added, “Ghana, Morocco, and Egypt are beginning to explore REITs as a tool for real estate development. For example, Ghana’s Affordable Housing REIT aims to address the country’s housing deficit, while Morocco and Egypt are leveraging REITs to attract foreign investment.
“Emerging trends in African REITs include niche sectors such as student housing, healthcare facilities, and affordable housing gaining traction, such as the Acorn Student Accommodation REIT in Kenya, which has successfully tapped into the growing demand for student housing in urban areas, sustainability, and green buildings. As global awareness of environmental issues grows, African REITs are increasingly focusing on sustainable and green building practices. Properties that meet environmental, social and governance criteria are attracting more investors due to their long-term cost savings and higher returns.
“In addition, the adoption of technology in property management is another emerging trend. Proptech solutions, such as smart building systems and online property management platforms, are being integrated into REIT portfolios to enhance efficiency and tenant satisfaction. African REITs are beginning to explore cross-border investments to diversify their portfolios and mitigate risks. For example, South African REITs like Growthpoint and Redefine have expanded into other African countries and beyond into Europe.”
The report further noted that for investors looking to capitalise on the African REIT market, several areas present promising opportunities, such as affordable housing.
It noted, “With rapid urbanisation and a growing middle class, there is a significant demand for affordable housing across Africa. REITs that focus on this sector can benefit from long-term growth potential. As African economies continue to grow, the demand for offices, retail malls, and industrial properties is expected to rise. Investors can focus on REITs with strong portfolios in these sectors.
“Niche markets such as student housing, healthcare facilities, and logistics hubs offer unique opportunities for investors. These sectors are less saturated and can provide higher returns; REITs that prioritise sustainability and green building practices are likely to attract more investors in the future. ESG-focused properties not only align with global trends but also offer long-term cost savings.
“Overall, the African REIT market, though still in its early stages, holds immense potential for growth. South Africa, Nigeria, and Kenya are leading the way, with emerging markets like Ghana and Egypt showing promise. Emerging trends such as niche markets, sustainability, and technology integration are shaping the future of African REITs. For investors, focusing on affordable housing, commercial real estate, niche sectors, and ESG-focused investments can unlock significant opportunities.”
