Author: Makafui Kuffo
For the past few months, businesses, governments and organisations have had to re-strategize in a manner that anyone could barely anticipate. Like every other country in the world, Ghana suffered the effect of the global pandemic. The prices of major commodities declined unexpectedly and there was a decline in trade volumes. At the peak of the pandemic, Ghana’s GDP growth declined substantially. In fact, Ghana recorded the largest decline in GDP growth since 2016 in the year 2020. Obviously, Ghana’s economy was hardly hit by the pandemic. With several interventions such as lock-down, restrictions on international travels, and the development of vaccines, the world is nearing an era known as the post-covid era where it has become important that various economies find means of recovering. Similarly, certain sectors of the real estate market are in their recovery stages. While most people are very optimistic about the quick bounce-back of the real estate sector, there still remain some fears of investing in real estate in Accra. In this article, I have weighed the fears of investing in real estate against the opportunities of real estate investments for some key sectors of real estate.
Residential Real Estate
The impact of the pandemic varied across the two residential sectors – the sales market and the rental market. While the sales market recorded less transactions during the pandemic, the high-end residential markets which are dominated mainly by expats and diplomats suffered the most. Many expats and diplomats went back to their countries during the peak of the pandemic mainly because of the possibility of working from home leading to high vacancies in high-end residential real estate. Aside all of these, the residential market has shown signs of quick recovery as the government keeps easing restrictions, with both sales and rental transactions picking up. There’s also a new demand for home offices, as working from home has become a common practice. Although this may not reflect in the supply of residential real estate in the short term, this is foreseen to be a common feature in the supply of residential real estate in the post-covid era.
In Ghana, whereas most offices in other parts of the world resorted to working from home at the peak of the pandemic, the common practice has been to alternate between working in the office and working from home. Nearing the post-covid era, the running of shifts is gradually fading out at most work places. Despite this, there still remain a good percentage of office tenants who have devised means of effectively working from home. This has the possibility of causing a decline in office rents and occupancy rates – one that would barely reverse to the situation before the pandemic. Prime office rents have reduced substantially over the past few months.
The effect of the pandemic has seen an improvement in online retail platforms. Many are still discovering the effectiveness of these online retail platforms. This has the potential of leading to a decline in the supply of retail outlets. Although the patronage of online retailers may not completely eliminate the patronage of physical retail outlets, the demand for retail would still see some effects caused by the boom in online retail.
With a surge in online retail, logistics is gradually rising and presents prospects for growth in real estate investments. Presently, warehouse facilities have generally suffered some pressures in terms of increased demand. In view of this, innovation has become extremely important for the growth of the logistics sector for the economy of space. It is also foreseen that just as many other advanced countries are changing the existing use of distressed retail assets for logistics, Accra is likely to change the uses of many distressed real estate assets into warehouses. An increased demand for last-mile logistic facilities in areas closer to town centres is also foreseen as demand for online retail increases.
The hospitality sector suffered the most from lockdown restrictions and the restrictions on international travels. Although, some hotels served as isolation centres, the sector suffered a lot from the pandemic. With the present easing of restrictions on international travels, the sector has begun to see some patronage. However, recovery is gradual for most aspects of the hospitality sector. Many investors are still skeptical of investing in hospitality.
The healthcare sector is increasingly becoming a centre of attraction for many real estate investors as there has been the need for the development of the healthcare sector to ensure the delivery of quality healthcare services. The pandemic has brought out the defects of the healthcare sector and the need to increase the supply of real estate assets in the sector.
The need to go digital in the workplace has been reinforced by the effects of the pandemic leading to the need to move IT workloads to the cloud. Digital services have become very important due to the growth in the need for remote working tools. There is a new dimension of demand in data centres as the need has risen for the localization of data centres. This coupled with the digital Ghana agenda has made it necessary for data centres to be located in Ghana.
Indeed, although the pandemic has led to a decline in certain sectors of the real estate market, it has also opened up new opportunities for investing in real estate.
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