Ghana's Real Estate Market Performance - Northcourt


Friday, July 09, 2021 / 07:00PM / Northcourt / Header Image Credit: Northcourt

Being an excerpt from the Ghana Real Estate Market Report 2021 by Northcourt


The impact of the pandemic was more pronounced in the hospitality and office submarkets. And while several countries experienced a decline in footfall, the impact on Ghana's retail sector is less noticeable. Office vacancies continue to rise, following an increase in the supply of new office developments. Prime office rents have declined substantially - but this not the case with well-built low-rise buildings who seem to have sustained both tenancies and rents. That notwithstanding, the majority of retail vacancies can be attributed to the effect of the pandemic and the gradual development in online retail.


The decline in hospitality was a direct effect of travel restrictions. The residential sector has continued its growth path evidenced in the continuous supply of new residential units and moderation in residential vacancies. Increased demand for last-mile logistic facilities is foreseen as online retail continues to develop.


Ghana's real estate sector has expanded over the past three years due to a concentration of developers operating in the mid to high-end segments, the arrival of non-resident Ghanaians as well as foreign investors such as Grit, a REIT and GREA, a German corporate finance and investment management firm. Prior to the pandemic, the real estate sector's contribution to GDP was robust due to growing transaction volumes and an increase in the supply of real estate assets. Most real estate transactions in the Ghanaian market are concentrated in Accra and Kumasi.


The pandemic led to heightened health scares visible in the hospitality sector andGrade A Office/Retail developments. Travel restrictions further contributed to declining patronage of hotel spaces. Pipeline projects have also adjusted investment strategies in response to the impact of the pandemic.


An estimated 42.1% of Ghanaians own their dwelling unit while 29.7% live rentfree. Typically, Ghanaians prefer to build and own their houses incrementally which accounts for the moderated intensity of land use. Numbers from the Centre for Affordable Housing (CAHF) indicate that compound houses account for 57.3%, while detached and semidetached houses account for 28% and 4.7% respectively. Huts and flats account for 4.8% and 3.3%. As high interest mortgages are the order of the day the government continues to support affordable homes by easing access to housing credit for government workers. Developers focus on the middle to high income segments of the housing market.



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The President commissioned 204 affordable housing units in Tema while its Real Estate Investment Trust's (REIT) scheme also purchased over 120 housing units for onward renting out to public sector workers. The government projects the construction of 180 housing units at Tema and 200 units in three regional capitals.


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Accra continues to benefit from the interest generated from the 2019 "Year of Return" tourism and investment campaign executed in partnership with the Adinkra group. This in part contributed to the growth in demand for serviced apartments which remain a better choice when compared with grade A residential apartments (from a pricing perspective) and branded hotels (pricing and Covid-19 restrictions). Sales transactions initially declined as investors sought to understand their options as they reworked their portfolio strategy. There has been a gradual return to the developer market for residential assets.


Average monthly prime rents for a furnished 2-bed apartment declined from $2,800 to $2,400 with flexible payment terms. Supply slowed for much of 2020 but increased towards the end of the year. We expect that the slowing of the tourism industry will reduce the performance of the residential market. This will especially affect high-end residential developments and low to mid-market developments, less so. In general, capital and not rental markets will be more adversely affected. The supply of high-end residential units is expected to increase albeit at a slower pace for the rest of the year. Developers are revisiting project documents in a bid to match where the market is likely headed. Indicators suggest that prime rents will come under more pressure in the short to mid-term.



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The high-rise Meridian apartments stand out as one of the more vacant apartment blocks in the Airport residential area. Major roads in East Legon and Dworzulu are characterised by the conversions of residential developments to offices, restaurants and short let apartments. The Cantonments area, by comparison, is less busy along the main roads. A more executive, managed area. East Legon is recognisable by the concentration of a well to-do young demographic.




The strength of the 2018 and 2019 economy led to an increased demand for Grade A offices as the government made the business environment more welcoming for multinational companies. This contributed to an over-supply of office buildings. Goldkey properties completed the PWC tower in January 2020. Recent completions by the developer include Cannon House in the Cantonments area.



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The Accra office market has struggled to shrug off the impacts of COVID-19. There has been a rise in vacancy rates and moderation in rents. Analysts project that this will continue for the next 6 months in favour of occupiers and should ease to a more central stance thereafter. Ghana's office market remains concentrated around the core areas in Accra - The Ridge and Airport City. Office space demand in Ghana is primarily driven by the professional services sector.


Estimates put Ghana's formal office stock north of 1M sqm about 153,000 of which is grade A, predominantly concentrated in the CBD, Ridge and Airport City. Asking rents range between $320 - $450psm per annum with yields ranging from 7.5% to 8.5%. Despite the rather dour grade A office market, there were some bright spots which included EY's relocation from Canon to the EY tower, the Octagon, Grit Real Estate's Capital Place, Tullow Oil's headquarters and Ecobank's new office in Accra. Airtel and ExxonMobil are at different stages of exiting the Ghana market - the former, a result of a buyout by the Ghanaian government and the latter due to the fulfilment of contractual obligations. The Office market saw a decline in demand in 2020, an unwanted pause from the recovery of 2019. Occupiers are revisiting space requirements as Work From Home (WFH) becomes the norm.


The establishment of the mixed-use City Galleria project added 6,000sqm in Q3 of 2020. Rental values continued to struggle with weak demand - a result of the recovering economy and the Covid19 pandemic. Grade A rents ranged from $27 to $32psm per month while B-Grade rents ranged from $12 to $18psm per month.


Telecoms giant, Vodafone, instructed that about 95% of its staff work from home. Occupiers are revising their space requirements as the economy adjusts towards a future where working from home is the norm. This will lead to a reduction in demand for traditional office space. Octagon continues to record high vacancy rates and analysts suggest that terrible traffic, a closeness to the open air market especially when compared to the AFC building, Moevenpick hotel and the national theatre. The office market will continue adjusting to market fundamentals. EY moved into its circa 9,800sqm office building and rents are more likely to moderate as vacancies increase - caused in part by the decline in demand due to the Covid-19 pandemic. Landlords will again deploy incentives to encourage demand. Analysts however suggest that some investors may dispose of their properties.



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