2019:International Consultants say cautious optimism should guide the property market

It has been a year of mixed fortunes for property markets across the globe, and next year is likely to be the same. While there is optimism in most Asian countries, the ongoing trade war between China and the US could threaten the growth of property markets in some countries, such as China and Vietnam. However, there may be opportunities amid the risks as some companies may consider shifting their production to Asia to avoid higher US tariffs.

In New Zealand and Australia, the outlook remains positive, driven by positive economic growth, but the outlook for London and New York is cloudy. This is partly driven by the messy Brexit negotiations in the UK and the trade war and a generally unfavourable view of President Donald Trump and his administration globally and in New York.

Read on for what global consultants have to say about the year that was and the opportunities and risks that lie ahead.

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Wei Min Tan

Licensed associate real estate broker, Castle Avenue Team at R New york


”The Manhattan property market continued its weakness in 3Q2018. Prices per sq ft for condominiums declined 11% during this period, compared with the average price last year. The quarter was down 5% year on year.

This correction, which started in 2Q2017, is driven by the change in tax law for self-use buyers, global trade wars and rising interest rates. This weak market is despite a very strong US and New York City (NYC) economy. NYC’s jobs have increased 20% since 2009, unemployment is at a low 4.1% and consumer confidence is near an 18-year high. Basically, Manhattan is experiencing a dip or correction — the first since the Great Recession of 2009/10.

The decline during the 2009/10 recession lasted two years. Using the same gauge, I expect the Manhattan weakness to continue at least until the spring of 2019, if not longer. At best, next year will stabilise but I do not foresee the market surging.

The Brooklyn co-op market has performed well despite Manhattan’s weakness. Co-ops in Prospect Heights and Park Slope have been getting crowded open houses and multiple bid scenarios. In 3Q2018, the median price for a Brooklyn co-op increased 12% while the average price rose 11% year on year. Co-op prices in Brooklyn have set new records as buyers take advantage of lower Brooklyn prices, although, in certain areas, prices of Brooklyn co-ops are similar to Manhattan’s.

The Manhattan condominium market is obviously an opportunity buy. In addition to price declines, transaction volume was down 12% in 3Q. The core Manhattan market lies in the US$1 million to US$2.5 million price segment.

Anything above US$2.5 million is having an even tougher time. SoHo lofts, larger Manhattan apartments that are 2-bedroom and above represent the biggest bargain-hunting opportunities.

New development projects, previously non-negotiable on price and terms, are now open to negotiation. Some are even offering a booking down payment of only 10%, relative to the norm of 20% to 25%. This is a reflection of Manhattan’s soft market.

A global trade war would make foreign buyers nervous about investing in Manhattan. As it is, President Donald Trump does not have a favourable image globally. This, I believe, is partly due to the media’s negative bias on Trump. When the media portrays him unfavourably, the news affects what the world thinks of our government. The change in tax law and rising interest rates are inevitable and the market just needs time to accept the new environment. Also, Trump’s actions and the US economy would definitely impact the world’s perception of Manhattan”.

Anuj Puri
Chairman of Anarock Property Consultants


”Commercial real estate was the most buoyant sector in India last year and remained so in 2018. With the International Monetary Fund predicting 7.3% growth in India’s economy this year, this segment is gaining traction across major cities. Demand for Grade A office space is growing while vacancy levels are declining in prime locations.

This year also brought a ray of hope for the residential sector, with sales and new supply gradually picking up across the top seven cities of Bengaluru, National Capital Region, Mumbai Metropolitan Region, Chennai, Kolkata, Pune and Hyderabad. New launch supply as at 1H2018 increased by nearly 10% over the corresponding period last year. Housing sales have also risen more than 5% in 1H2018 compared with 1H2017.

On the retail front, nearly 85 malls are expected to come up across the country over the next five years. Of these, more than 30 new shopping malls, spanning nearly 14 million sq ft, are likely to come up in the top eight cities by 2020.

Considering the present trends in the realty market and Anarock’s data, we may see nearly a 15% to 18% increase in new residential launches in 1H2019 (96,000 to 98,600 units). Despite the teething problems of game-changing policies such as the Real Estate Regulatory Authority and Goods and Services Tax in 2017 and early this year, the realty market grew 10% year on year in 1H2018. However, the commercial market will be the biggest beneficiary of the country’s overall economic growth. Global and domestic companies will continue investing in India’s skilled labour and business-friendly investment climate by committing to large office spaces nationwide, which will invariably lead to more absorption.

Residential real estate is picking up and the trend is likely to continue next year. However, the commercial segment is likely to remain the most attractive for investors in 2019.

There is a huge variation in the rental yields of commercial and residential properties. Commercial properties, including Grade A office spaces in prime locations, yield 7% to 8% while the rental yield of residential properties, even in the best areas, is 2% to 3%. This is much lower than the best markets of the world, namely Indonesia, the Philippines and Thailand, to name a few. With increasing demand for Grade A office space, rents will most likely see a steady rise and the contractual terms will be far more structured.

All in all, the Indian real estate market will remain robust next year only if the overall macroeconomic environment remains favourable, as it is now. It will be interesting to see the response to the listing of the first real estate investment trust in India.

James Hodge
Associate director, CBRE cambodia


”The Phnom Penh real estate market continued to forge ahead this year, with occupancy and rents in the office and retail sectors rising despite growing levels of new supply. Overall sales of condominiums slowed but remained robust for well-located and well-priced projects.

To date, the office sector has performed best this year, with demand increasing from all quarters and rents moving upwards. Occupancy reached levels not seen since modern supply first entered the market a decade ago, and newly completed properties are performing well.

Retail continues on an upward trajectory, propelled by steadily rising levels of disposable income. Supply, too, is growing substantially with much-needed well-planned and modern developments to diversify the consumer experience.

We anticipate an increased level of investment as we end the year and move into 2019. Development activity has picked up with clear diversification, particularly from local developers who are increasingly considering the commercial markets instead of focusing on the residential sector. Investors, including some large corporations, are showing interest in this market following the peaceful conclusion of the general election.

We anticipate a continuous surge of interest from local buyers for newly launched affordable housing projects. Luxury projects will primarily target foreign investors seeking higher yields than those available in their home markets. Commercial income-bearing assets are also likely to see a greater volume of transactions with investment sources diversifying and targeting asset classes that are widening to encompass more than land. Well-let office assets are likely to be an attractive asset class, with hospitality also performing well in the context of rapidly growing visitor numbers and improving infrastructure.

The large risk is geopolitical in nature, in particular hinging on the degree of pain felt by the country’s garment producers should the European Union cancel Cambodia’s trade preferences under the “Everything but Arms” initiative and any impact flowing from the US-China trade war should weaken sentiment from Chinese investors and enterprises active in the Southeast Asian markets. Domestic risks appear to be low, following the conclusion of Cambodia’s election and generally high confidence in the continued growth of the economy. However, oversupply is a threat in some sectors, particularly retail and mid-range condominiums”.


Dave Chiou
Senior director of research, China, Colliers International


”The overall market started off strong with all sectors carrying the momentum from last year. By May, concerns about the US-China trade war had started to seep into the market, causing a drop in investment sentiment as investors became increasingly cautious about the future.

The logistics sector in Shanghai remains one of the few areas that has seen limited impact so far, due to: (i) strong demand from e-commerce; (ii) a low vacancy rate of 8% with relatively mild supply increases of 10% to 15% per year, which should be easily absorbed by the market; and (iii) the demolition of illegal and unregistered warehouses leading to a 10% overall increase in logistics rents.

As a result of the lingering effects of the trade war and the government’s continued push for deleveraging, overall market demand is expected to be subdued next year. While the US and China have been trying to resolve their disputes, the likelihood of seeing a resolution before 1H2019 remains slim. Even if the disputes were to be resolved in the next two to three quarters, potential investors will remain on the sidelines for another one to two quarters before they actively resume their investment or expansion plans.

The logistics sector will be the bright spot next year, as vacancy rates will remain low and rents will continue on an upward trend. The government’s support for China’s first International Import Expo (CIIE), from Nov 5 to Nov 10, is a clear indication that the economy is transitioning into a more domestic consumption-driven market. Demand for logistics will continue to remain strong with more imported goods. The logistics sector will likely get an immediate boost from CIIE and the positive effects will trickle down to office and business parks in 2H2019.

The swing factors that could impact the property market include unexpected rate hikes and a prolonged trade war. We believe there is limited possibility of a rate hike next year, as China is trying to stimulate the economy to counter the negative effects of the trade war. On the flip side, the upside to the market includes more reserve requirement cuts injecting more money into the system and rate cuts to stimulate economic growth. In addition, a resolution to the trade war would improve market and investment sentiment, leading to an increase in real estate demand. Although domestic consumption now forms a larger slice of the economic pie, investments remain the biggest driver of growth, accounting for 42% to 45% of China’s overall gross domestic product”.

Dang Phuong Hang
Managing director, CBRE vietnam


”Strong gross domestic product growth of 6.98% for 9M2018 helped Vietnam affirm its position as one of the fastest growing economies in Asia. Its real estate market in general and in Ho Chi Minh City (HCMC) in particular, has had a good year so far.

Generally, the office sector has witnessed a significant increase in performance from the perspective of landlords, on the back of very limited new supply. Prime properties in the central business district with Grade A offices have seen rents rise more than 16% year on year, while vacancies are below 4%. E-commerce, co-working space and business centre companies emerged as important sources of demand for office space in HCMC.

After reaching a new high in terms of new supply in the past three years, new condominium supply, which is often considered the most dynamic sector of HCMC’s real estate market, moderated in 9M2018. Absorption rates of new projects, however, are still positive.

Many recent media discussions have centred on a possible recurrence of the so-called “10-year crisis cycle”. However, the steady factors that have underpinned the recent growth story of Vietnam’s real estate market — strong economic growth, a high level of foreign direct investment, relatively stable inflation and interest rates, rising income for the middle class, increasing number of tourist arrivals — are expected to remain intact next year.

The office sector, in particular, is expected to continue to see improving performance even though there will be some new buildings in non-CBD areas. The retail sector will see the reopening of a prime property, expansion of some high-profile non-CBD malls and proliferation of retail podiums (as part of residential developments). The condominium sector will continue to flourish as demand is still in place. Strong interest from foreign buyers is likely to continue, with many prime projects last year reaching the sales quota for foreigners, which is currently capped at 30% in one building.

The ongoing trade war between the US and China could have a spillover effect on Vietnam, as the country has integrated so deeply with the global supply chain that any reduction in global trade is going to have a negative impact on the country’s economy and, consequently, its real estate market. Having said that, this has led many global manufacturing companies, especially in the garment and textile industries, to consider moving their plants to Vietnam, which is evident from the rising number of enquiries that CBRE Vietnam’s industrial leasing team has received this year. This will be beneficial for the industrial real estate sector.

Steady economic growth and political stability were considered advantages that make Vietnam an attractive investment destination in recent years. However, the recent reshuffle of the government, nationally and at HCMC level, may affect the process of acquiring land or construction certificates for developers in the short term. Improving the infrastructure will play a pivotal role in further development of Vietnam’s real estate market. There is currently high expectation in HCMC about the upcoming Metro Line #1 (first Metro line ever in the city) and many projects close to the future stations will continue to be launched”.

Emily Cao
Head of research, north china, Colliers International


”The Grade A office, prime retail and prime logistics sectors of the Beijing commercial property market performed well this year. The prime logistics market saw the fastest rental growth rate due to the government’s demolition of illegal warehouses starting at end-2017. Rents increased to 48.1 yuan per sq m per month at end-3Q2018, 11.8% higher than the rate at end-2017. However, rising rents led to a slight increase in the vacancy rate of 0.3% as at end-3Q2018. We expect the vacant space to be rapidly absorbed in the upcoming quarters, considering the undersupply situation in the Beijing prime logistics market.

Despite the postponement of several launches to next year, nearly 550,000 sq m of Grade A office supply entered the market in 2018, the highest in the past decade. The vacancy rate increased by only 2% as at end-3Q2018 and rent reached 327.3 yuan per sq m per month by end-3Q2018, a decline of 1.4% compared with end-2017. This is mainly due to two new projects in an emerging sub-market that entered the market with high vacancy rates and low rents. The vacancy rate in the established sub-market was largely stable or declined slightly, while rents were largely stable or showed increases.

Two new shopping malls with a total space of 151,000 sq m opened in the first three quarters of 2018. The good performance of existing projects and the newly launched projects pushed down the overall vacancy rate by 0.7% compared with end-2017. The overall ground floor rent increased slightly to 825 yuan per sq m per month by end-3Q2018, up 1.1% compared with end-2017.

The Grade A office market is expected to hit a supply peak next year, with more than one million sq m of new supply entering the market after the postponement of several projects this year. The vacancy rate is projected to increase to 15.6% by end-2019 from 10.3% in 3Q2018. The abundant supply will also push rents down by 0.3% year on year in 2019.

The prime retail market will have nearly 630,000 sq m of new supply next year, which is expected to push up the vacancy rate to 4.3% by end-2019. Considering that 71% of the new supply will be outside the 5th Ring Road, the average rent is likely to decline 1.3% year-on-year in 2019.

Close to 260,000 sq m of new supply will enter the prime logistics market. However, we expect the undersupply in the segment to help absorb new supply and existing vacant space quickly. As a result, we project that all the prime logistics projects on the market will be fully occupied by the end of next year, supporting the 4% year-on-year increase in rent in 2019.

The office and logistics sectors are the most attractive to investors. However, the lack of tradable projects has resulted in fewer transactions this year. Thus, business parks have became a hot segment in recent years as they can be considered alternative office properties. With investors paying more attention to business parks, transacted prices have increased rapidly, which compressed the investment yield. We expect this condition will continue next year.

Policy plays an important role in the development of Beijing’s commercial property market. The release of the Beijing City Master Place in September last year and a series of policies and regulations in 2018 are expected to change  future demand and supply. For example, the relocation of non-capital functions out of the Beijing core area is likely to cause a decline in future office supply.

With Beijing positioned as the national political centre, national cultural centre, international commutation centre and technological innovation centre, we expect the technology sector to develop more rapidly with the support of the government. The tenant structure of office projects also has the potential to change in the long term.

We expect the commercial property market to continue to see strong demand in 2019, supported by a faster economic growth rate”.

Ian Little
Head of research, Bayleys Realty Group Ltd


”It has been another year of positive economic growth for New Zealand. Underpinned business expansion and new business formation have seen the country’s commercial and industrial property sectors performing strongly over the course of this year.

High levels of tenant demand have, to date, kept pace with the new development pipeline despite a significant increase in construction activity. As a result, vacancy rates across most of the country’s major centres have held at historically low levels, placing upward pressure on rents.

The investment sector has also remained extremely active with particularly fierce competition for institutional grade assets. Local investors, including property syndication groups, have faced increased interest from international entities looking to secure a position within the New Zealand market. Over the last four to five years, about 50% of transactions of commercial property with a purchase price of over NZ$20 million have been to international investors. This competition for assets has resulted in further yield compression driving an upward bias to capital values.

All commercial property sectors have performed well over the last year, with MSCI data showing the total return from “All Property” to have been just below 10% in the year to June. The industrial sector, though, has generated the highest returns, with the latest available figures showing the annual return to have exceeded 12.5%. These figures reflect the fact that vacancies in the sector are particularly low across most of the country’s major centres. Average vacancy rates across Auckland, Hamilton, Tauranga and Wellington are below 4%, according to surveys conducted by Bayleys Research. In addition, the sector has attracted high levels of investor interest given that entry values are generally lower than those prevalent within the office sector.

Looking ahead to next year, the outlook remains positive. The economy is forecast to continue to grow at a robust rate. There are still few signs of inflation, which will allow the Reserve Bank of New Zealand to hold interest rates at the current historically low levels. The pressure on rents is likely to ease, particularly in the office sector, as a significant supply pipeline better balances supply with demand.

Once again, the industrial sector is likely to be favoured by investors. Vacancy rates look set to remain at low levels given that the majority of new developments are conducted on a design-and-build basis as opposed to speculatively. The sector also provides opportunities across a wide value range.

Any headwinds impacting the market are more likely to come from international factors, such as the possibility of an escalation in trade wars or increases in international interest rates”.

Tom Bill
Partner, Head of London residential research, Knight Frank


”It was a year of two different halves for the prime London residential market in 2018. During the first half, sales volume and pricing strengthened following a period marked by political uncertainty as well as tax changes. In the second half, prices and activity levels declined as Brexit negotiations moved towards their conclusion and political uncertainty intensified. However, there are signs that pent-up demand is forming, which should underpin future market activity.

There has been little consistency in the performance of prime London residential markets this year. However, needs-based buyers have driven demand across a range of markets. As prices have adjusted, buyers who need to move for family or work-related reasons have been more active in the market, which has benefited the prime central London markets, including Notting Hill and Chelsea. Public realm improvements and the arrival of high-quality, new-build developments have helped drive demand in markets such as Mayfair and Marylebone.

We expect modest price growth to return next year, based on the assumption that the UK and European Union will finalise a Brexit deal. The pent-up demand forming in the sales market could help drive any relief rally. Pricing across prime residential markets in London has now largely adjusted for the impact of higher transaction costs, so, once current levels of political uncertainty recede, activity levels should strengthen.

The trend for needs-driven buyers will continue into next year, which means markets with a higher proportion of those buyers will continue to benefit. It is also worth thinking beyond the political dimension, and factors such as infrastructure will continue to play an important role, with Crossrail due to open next year. The political backdrop will be the primary consideration over the next 12 months. In essence, the more distant the risk of a disorderly Brexit, the stronger the market performance should be”.

Denis Ma
Head of Research, JLL



”The Hong Kong market started the year strongly but escalating trade tensions between the US and China, along with rising interest rates, have dampened market sentiment in the second half. Overall, the rental and investment markets will end the year higher but the housing market has likely peaked.

Looking at leasing markets, the office sector has posted the strongest gains. Supported by a tight vacancy environment and growing demand from co-working operators, Grade A office rents increased 6.2% in 9M2018. On the investment side, the housing market has yielded the highest returns with capital values of luxury properties gaining 12.8% in 9M2018. Housing prices are likely to retreat slightly in 4Q2018 but it is unlikely to affect the overall performance of the sector over the full year.

The local property market is likely to soften against an increasingly uncertain macro-environment as we head into 2019. The city’s red hot housing market, which posted the strongest gains this year, is likely to come under the most pressure. With the new vacancy tax, primary sales restrictions and a supply glut coming when market sentiment has deteriorated significantly, an increasing number of developers are now pricing new units to sell, which in turn is putting pressure on vendors in the secondary market to lower prices. Against this backdrop, we now forecast housing prices to drop about 15% next year.

Growth across the other sectors is also likely to slow as the downstream effects of the US-China trade war and a slowing mainland China economy weigh on merchandise trade flows and business sentiment in the city. In this regard, the rental and investment markets outside the residential sector are likely to be able to tread water and post marginal growth in 2019 but the risks to our forecast will be heavily skewed towards the downside.

With markets nearing their cyclical peaks, investors must focus on secular trends that will help generate returns over the longer term. In this regard, next year may present an opportunity to enter the market, with vendors more willing to negotiate.

In the retail sector, the development of new residential clusters and the enlarged consumer base is drawing investors towards neighbourhood malls. The growth of e-commerce and the completion of the Hong Kong-Zhuhai-Macao Bridge, along with the future addition of a third runway at Hong Kong International Airport will continue to support the demand for high-quality warehousing space. The broader industrial sector also has unique opportunities with the recent government announcement of the resumption of “revitalisation” policies aimed at promoting the higher alternative use of industrial buildings.

As an open economy, Hong Kong remains highly sensitive to developments in the global economy. A messy Brexit, deterioration in US-China relations, a rising interest rate environment and volatile equity markets can all significantly affect market sentiment, which in turn will put increasing downward pressure on the rental and investment markets.

Hong Kong’s property markets are already in the latter stages of the current cycle and downside risks now far outweigh those on the upside. Weaker demand arising from a slowing mainland China economy has the potential to not only affect the city’s important trading sector but also business sentiment, which will lead to a slowdown in demand for office space and retail space as tourist numbers moderate”.


Ben Burston
Head of research and consulting, Knight Frank Australia


”The Australian real estate market performed strongly this year, led by the office and industrial sectors. The residential sector, on the other hand, has experienced divergent performance with a cyclical correction in parts of the market, most notably a decline in average values in Sydney and Melbourne, while the top end of the market has seen continued growth.

Total returns across the commercial markets are likely to hit double digits for the fifth consecutive year, reflecting the strong performance of the office and industrial markets with total returns of around 14% and 12% respectively. Both markets have continued to benefit from yield compression as investors have sought out the depth, liquidity and long-term growth potential of the major Australian markets. The retail sector has also been solid, although it has not witnessed the same level of growth, with total returns of about 8%. The top performers have been Sydney and Melbourne offices, where an upsurge in demand has exposed a severe lack of supply, driving up rents and investment returns.

Australia’s economic growth momentum has provided a strong tailwind for real estate, and the outlook for next year is for sustained growth. More importantly, we anticipate a more even geographic pattern than in recent years, when Sydney and Melbourne have fared best.

Once more, we expect the strongest performance from the office and industrial sectors, which will benefit from ongoing employment growth on the demand side, while the supply side struggles to keep pace.

On the residential front, the market will remain uneven, with average values in Sydney and Melbourne continuing to adjust, while the prime market fares better and Brisbane and Perth benefit from improving economic growth.

In 2019, we expect the industrial market to perform best as it continues to benefit from the structural uplift in demand driven by evolving supply chains and the push to improve operational efficiency and shorten delivery times for the consumer.

The sector has effectively been rerated as a more secure investment proposition, just as it has become more critical for occupiers to modernise and expand their premises and locate themselves strategically adjacent to major transport hubs. We believe that this uplift in demand, and its consequent impact on the market, has yet to fully play out.

The growth outlook would receive a further boost if we see a continuation of the recent upward trend in global commodity prices. This has the potential to result in a more rapid recovery in Perth, Brisbane and Adelaide with an impact across all sectors. In addition, the large pipeline of public infrastructure investment across all states, and particularly New South Wales and Victoria, remains a key driver of growth and a source of new development opportunities.

While the outlook is positive overall, one risk is a potential slowing in the pace of growth of consumer spending reflecting an easing in the pace of employment growth and the flow-on impact of the decline in average house prices on consumer spending patterns. This could create a headwind for the retail sector and weigh on investors’ perception of the sector’s growth potential”.


Desmond Sim
Head of research for Singapore and Southeast Asia, CBRE


”As at 3Q2018, the Singapore economy had grown 2.2% year on year, slower than the 4.1% seen in the previous quarter. Growth was mainly supported by the finance and insurance, manufacturing and business services sectors. While Singapore braces itself for the impact of the US-China trade war, the negative spillover is likely to impact the economy in the latter part of this year and beyond.

Singapore has so far escaped relatively unscathed and the outlook for now still appears mostly positive. It also seems that Southeast Asia is likely to be the biggest beneficiary of this trade war, which could lead to opportunities opening up for Singapore — while some manufacturing companies plan to shift production to Southeast Asia, Singapore could benefit indirectly if their head offices are set up here.

The Grade A office market has already enjoyed a fifth consecutive quarter of rental growth. With the occupancy of the Grade A Core CBD market tightening, leasing demand looking relatively stable and the supply pipeline moderating, landlords have been encouraged to press on with higher rent expectations. This is expected to carry over the next two to three years, albeit at a more measured pace compared to the early part of the rental recovery cycle.

One notable trend is that landlords are actively engaging or incorporating flexible space concepts into their portfolios. Many landlords have either invested in an operator or created their own co-working brand.

However, the same cannot be said for the residential sector. For 1H2018, the Singapore residential price index enjoyed 7.4% growth, which encouraged strong investments in residential land for 1H2018. With property developers all vying to shore up their land bank, a total of S$13.33 billion, or 46 residential sites, were transacted from both private and public sources.

However, on July 6, new cooling measures were introduced to curtail the exuberance of the purchasers’ market and to curb developers’ appetite for land. There was an immediate impact — the pace of growth of the residential price index slowed to 0.5% quarter on quarter for 3Q2018.

In the capital markets, residential transactions accounted for the bulk of investment volume year to date. However, the slowdown in residential sales in 3Q2018 led total investment sales volume to decline 26.6% q-o-q to S$7.735 billion. Nonetheless, office assets continued to be sought after by investors. The overall office investment volume rose 24.2% q-o-q to S$1.308 billion in 3Q on the back of the improving occupier market as well as the diversion of investor interest to the commercial market in the light of the cooling measures impacting the residential sector.

Looking ahead, given sufficient market liquidity, investors are still exploring across geographies and asset classes as part of the portfolio selection process. However, investment sales volume will depend on the availability of assets. With short-term interest rates following the path of bond yields, this is expected to lead to rising interest rates. As a result, some core investors may find it challenging to deploy capital in Singapore as existing net property yields are challenging the yield spread above the risk-free rate.

Specialised assets, however, are gaining more attention. More boutique investors are eyeing shophouses for potential capital appreciation following asset enhancement initiatives”.

Anton Sitorus
Director, Head of research and consultancy PT Property Connection Indonesia 



”In general, the market saw a decline in performance compared with last year. Many factors contributed to the weakening demand — economic volatility, cautious corporate expansion, weak investor sentiment, property prices and over-valued rents in many popular areas — despite some relaxation in government policy and regulations.

In recurring income properties, such as office, retail and hotel, the market suffered from rising vacancies as demand cannot keep up with supply growth, especially in the office sector.

Sales volume in the strata apartment market shrank considerably, which is in line with fewer new launches on the back of slow take-up and tough competition.

In the Jakarta CBD Office, net demand up to 3Q2018 was slower year on year, resulting in vacancies surpassing 25%. Rents in premium and Grade A buildings contracted more than other segments. For non-CBD offices, net demand was slightly higher than last year, but more supply also caused vacancies on a high level of around 25%. Rents remained flat.

As for Jakarta shopping malls, limited retailer expansion continued to put pressure on demand and, accordingly, rent growth. High-end malls had to adjust their rents during this challenging period.

In the Greater Jakarta apartment market, sales dropped considerably with fewer project launches in Jakarta than last year. Developers are now focusing more on the outskirts, such as the Bodetabek region, as available land for new developments is plentiful and affordable — yet overall sales volume was relatively similar to last year’s. There were no changes in prices this year as buyers and investors perceived that prices had gone through the roof.

Modern logistics facilities are seeing a gradual growth in demand, supported by rising household consumption, which requires better, more efficient distribution of goods and services, as well as the growth of e-commerce.

Our forecast for 2019 is not different to this year’s. We anticipate a further decline in the first quarter due to the election that will be held in April. Both developers and buyers are likely to take a wait-and-see approach until after the election results before taking action to execute or delay their expansion plans.

The more challenging situation is also expected if the impact from the tightening global economy and other external factors are channelled through the property market, such as a weaker currency and rising interest rates. However, we expect good things to happen in 2H2019 in view of growing investor confidence post-election as a prelude to a structural recovery in 2020 and beyond.

In terms of market prospects, the apartment and logistics sectors will remain attractive are likely the safest for investors because fundamental demand in both sectors is relatively resilient, supported by strong end-user demand as opposed to the currently weak investor market.

The negative factors we are concerned with are land scarcity and availability, which is causing a high-priced environment. Red tape and unfriendly government regulations are still issues in some areas and can be counterproductive to the market.

However, there are positive factors: (i) infrastructure projects that will enhance the city and the region in the long run; (ii) some relaxation in government policies; and (iii) pent-up demand that has accumulated in the last four to five years”.


Top 5 Best African Countries To Invest In Real Estate

Real estate remains a booming opportunity for Africa-focused investors for good reasons. The growth of Africa’s cities creates a demand for increased volumes of high-quality commercial and residential real estate.

The rise of the urban middle class drives retail property development, particularly as modern shopping malls spread across the continent.

A growing number of multinational companies are searching for office space in the newly emerging cities. The rise of regional tech hubs and an expanding oil and gas sector creates job opportunity with no place to house the employees.

Africa’s population boom is also a burdening factor on Africa’s cities. A need for mass market affordable housing, high-end properties and all in-between stems from the diversity in the multiplying populations, including middle to high-income locals and young entrepreneurial.

As an investor, these five countries offer the greatest investment opportunity in real estate (provided you find the right developer as a partner):

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Angola is Africa’s fifth largest economy with Luanda and Huambo as its major cities. Despite the recent construction of new properties across both cities, primarily Luanda, the country suffers from a lack of good quality office and residential space. Surveys reveals that the majority of the near 300,000 square meters of office space brought to the market are already pre-leased or sold before officially opening. Although oil prices have fallen, the oil sector remains the primary occupier of local real estate with no signs of letting up. Prices for office space, accordingly, are the highest in Africa at $150/m2 per month in Luanda (the 2nd highest in Africa is comparatively $65/ m2 less).

A growing industrial property market – largely associated with the oil sector – is fully occupied, particularly in the Luanda port area. Some space is available in Viana to the east of the city but with strict criteria for potential tenants (i.e., many potential tenants cannot get access to space). Officials are consequentially looking to boost warehouse space, especially as port activity increases in the near future.

The retail market, although in its infancy, also provides a high return on investment with prices at $120/m2 per month and a rapidly expanding middle class in Luanda.

The residential market may be the least attractive in the country. “In the country” is the key word. Downward pressure on residential prices from falling oil prices still means that you pay more than 3x the price for a house compared to the 2nd most expensive market in Africa.


Nigeria is Africa’s largest economy with Lagos and Abuja as its major cities. You get mix reviews from developers in Lagos and Abuja on the effects of recent construction. Capital has been poured extensively into both cities. Yet the prices in both markets are consistently at two of the most expensive. Lagos office space rents for $85/m2 per month while the Abuja office space, despite being in a market nearly 1/4 the size of Lagos, still rents for US$72/m2 per month.

As Africa’s sixth fastest growing economy (according to IMF projections 2015-2019), Nigeria is likely the most attractive market for retail property. Private equity funds have been active in this space in Nigeria for several years but prices remain high.  It is home to the 3rd and 4thmost expensive market for retail space at $80/m2 and $72/m2 per month in Lagos and Abuja respectively. Housing prices accordingly still sit at the top of the range, only ‘outpaced’ by the aforementioned Angola. An executive house with 4 bedrooms goes for $8,000 and $8,500 per month in Lagos and Abuja…again, in Angola, the same property costs about $25,000.


Egypt is Africa’s third largest economy with Cairo, Alexandria and Giza as its major cities. Egypt is not Africa’s fastest growing economy – not even breaking the top 20 in Africa for the next five years. But its retail market is booming and looks to stay so in the near future.

The return to growth began with regaining lost production to match pre-Arab Spring numbers and then expanding at a rate that could surpass pre-Arab Spring projections. Cairo retail space accordingly is renting for $100/m2 per month with some insiders estimating that the price could rise in the short term as consumer spending grows and retail development slowly catches up to match the demand.

Office space rents for $35/m2 per month in Cairo, making it one of top 15 expensive cities. But the presence of a significant amount of office space and rather slowly re-emerging economy (especially if you exclude the retail sector) limits the upside for this subsector. The industrial and residential market are similarly in the same situation with pretty moderate prices compared to other major African cities.


Offshore natural gas and a growing middle class underscores the changing real estate landscape in Mozambique and the country’s global reputation. It is projected as the 2nd fastest growing economy in Africa over the next five years, only trailing Ethiopia. Maputo is its major city (and capital). Although rather small for a major African city (with less than 2 million people), real estate prices show little sign of dropping.

Office space rents for nearly $40/m2 per month. Demand rapidly increases as banks, telecoms, and diplomatic/aid agencies consume the limited amount of good quality properties. The arrival of oil and gas executives has effectively led to the conversion of high luxury houses into office space until property developers can satiate the sector’s appetite.

The Mozambican government’s plans to invest heavily in the country’s industry and manufacturing market is pushing up industrial real estate as companies rush in. Prices at the ports, particularly for warehouses, is one of Africa’s most expensive. But most estimates and talk coming from government officials suggest this sub-sector may not be anywhere near as attractive as the office space sub-sector as the government may fit a good amount of the bill which should create downward pressure on prices.

Retail, although in a similar infancy stage, has a greater upside as consumer spending skyrockets. Retail space rents for $40/m2 per month in Maputo, which makes it one of the ten most expensive African cities for such space. Beyond that, it is also a city that will rapidly see rising incomes post-gas production and export in the near term.

 South Africa/Kenya

Both countries are still ‘top opportunities.’ Retail space is attractive in both countries, specifically in Johannesburg (SA), Cape Town (SA), and Nairobi (Kenya). Retail space is the 5th most expensive at US$60/m2 per month in both Johannesburg and Cape Town and 8thexpensive at US$48/m2 per month in Nairobi. Although attractive on the surface, insiders suggest that recent strikes in the South African market and the terrorism in Kenya has slowed the demand from potential retail tenants as the local economies flush out the internal issues. Office space prices moderated in the past 12 months in Kenya as business has been hesitant to expand until the government addresses its suddenly re-emerging terrorism concern. All that being said, we are discussing Africa’s 2nd largest and 8th largest economies in South Africa and Kenya respectively with Kenya as the projected tenth fastest growing economy in Africa through 2019. What seems risky today will pay dividends in the long run…at least the numbers suggest so.

Block makers laud Dangote on new cement

Block Moulders Association of Nigeria has commended the Dangote Group for its new cement, BlocMaster.

The Chairman of the block moulders in Suleja, Niger State, Chief Patrick Markuche, who described the new product as Dangote’s best in terms of quality, said it had helped improve the association’s members’ revenue.

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He said members of the association had passed a vote of confidence on the cement as well as the company.

“This is the best product from Dangote so far. We have tested it and we are very happy with the result we got so far. Even in the rain, this cement is the best for the purpose,” he said.

In a statement on Sunday, Dangote Cement said a distributor, Alhaji Mukhtar Moriki of Albabelo Company, said block makers now demand for more of the cement.

Dangote’s National Sales and Distribution Director, Adeyemi Fajobi, said the new cement was carefully made as part of the company’s improvement on innovation.

He said, “Our customers, and key distributors are happy because of the strength and quality of this product. It is also very affordable and it gives them far more yields than all other cements in the market. It is currently the highest grade of cement in Nigeria.”

“It is by far the strongest cement, bagged in the Nigerian market. This cement is 50 per cent stronger after one day and up to 15 per cent stronger after 28 days when the cement finally sets, so that explains the excitement displayed by our retailers and key distributors across the country.”

Fajobi said BlocMaster was a product of years of research, created with high quality to give users value for money by eliminating loss.

CBN Set To Launch National Microfinance Bank

As part of efforts to enable speedy disbursement of its several intervention funds including the Agribusiness/Small and Medium Enterprises Investment Scheme (AGSMEIS), the Central Bank of Nigeria (CBN) has said it will in collaboration with the Bankers’ Committee and the Nigerian Postal Service (NIPOST) start the operation of a national Micro Finance Bank (MFB) CBN Governor, Mr Godwin Emefiele made this known at the opening ceremony of the 10th annual bankers’ committee retreat in Lagos, saying it will further enhance financial inclusion and credit to fund the agricultural sector and small and medium scale (SME).

Emefiele said the national MFB slated to launch next month would leverage on the existing NIPOST presence in 774 local and aid the CBN and the bankers committee effort in accessing the Anchor borrowers fund, SME fund and other initiatives tailored towards SMEs, farmers and the CBN’s financial inclusion drive. He also said this was to help ensure the success of the N26billion set aside to finance agric businesses and other small informal businesses under the Agribusiness/Small and Medium Enterprises Investment Scheme (AGSMEIS).

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“Today, the central bank has N220 billion that is set aside under the micro small and medium enterprise fund. Nigerians where happy when they heard that the banks, out of their magnanimity, decided that 5percent of their profit would be set aside to support Agric business and SMEs. “We have over N60 billion sitting in the banks currently in CBN and why should that money be sitting in CBN and just be earning Treasury bill rates. It is meant for the micro small and medium enterprises and for the weak in our economy that would not ordinarily have access to knock at your door.‎ “That was why we voted last week at bankers’ dinner, that a national micro finance bank would kick off by January 2019.

In order to collectively address the challenges hindering the achievement of the objective of the AGSMEIS initiative, the CBN is considering the proposal to the establishment of the national microfinance bank which would leverage on the Nigerian postal service presence in 774 local government areas across the country. “We have called on NIPOST and they have agreed to join us in this. They would provide their facilities in 774 local governments and this would be their own contribution by way of equity into the establishment of the national MFB.

We would provide the infrastructure and this MFB would be available in 774 local government across the nation.” He added that it expected that the bankers committee and NIPOST would have representation on the board of this national MFB. “The task and responsibility to improve our rural communities is in our hands and we believe strongly that using this infrastructure of the national Mfb, we would get to achieve the objective of creating jobs and enhance the skills of our people in our rural communities, improve and grow the economy so we can achieve the development that we so badly require in Nigeria today.” Furthermore, on the MFB, he said the proposed MFB would be expected to engage in strategic partnership with NIPOST while the NIRSAL which is owned by the CBN would be expected to bring its experience in financing low income entrepreneurs and de-risking credit originated by the national MFB by providing guarantee in line with its mandate.

On investments towards power, he said:  “In collaboration with the government, the Nigerian Electricity Market Stabilisation Facility was set up to rescue and reset the electricity industry for privatization in 2015. The CBN in line with the proposal establishing the Nigerian Electricity Market Stabilisation Facility invested N213 billion in it.  The aim was to provide refinance for the participating banks and also to ensure that necessary bank guarantees are put in place to back the contracts for the industry. “The Bankers’ committee played the role of first line financiers ensuring that the facility is repaid. Through the facility, the Distribution companies have been able to post LCs in favour of NBET. Other outcomes are the purchase of over 700,000 meters, purchase and installation of 500 transformers,   recovery of  1,000 megawatts and  increase in gas supply commitments. Several contracts were also executed as a result of this intervention,” he said.

How Innovation In Real Estate Is Encouraging Growth

As the Indian economy evolves, value-creation opportunities in real estate will exist as much in capturing the consumption-growth upside as in pursuing strategies of specialisation. The last decade has seen significant investments in real estate and real estate-related infrastructures -1.93 %, as investors braced for growth and development. The next phase of growth will be driven as much by value-added real estate strategies as by capital market innovation in real estate financing.

Mapping real estate by larger secular trends would give us fascinating insights into the real pockets of demand. Some of the broad secular trends we see are rising income profiles, a gradually larger pool of senior citizens with life expectancy increasing, increased retail consumption (both online and offline) and increasingly high consumption of data, among others. Not only have these trends created the need for specialised real estate, but also the need for greater partnerships between service, providers and real estate investors.
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Real estate strategies will have to go on to add value through a broad array of services through partnerships and astute asset selection. For example, warehouse real estate space has received significant investments over the past few years. The question is: How will the market evolve as demand further picks up?

The key to warehouse businesses is twofold. Firstly, scale up from being purely real estate providers to “solutions providers” Such
Such warehouse businesses should have the capacity and know-how to cater to an increasingly large and fragmented user-base with technology, real estate and supply-chain expertise to help support the business ecosystem. While this trend has started already, the future holds greater promise and investment returns, if done well.

Secondly, for warehouse businesses and platforms, it is essential to keep building on the spoke and hub model. Large-scale warehouses, linked to dispersed smaller catering to increasingly quicker delivery times is how it is going to be in the future.

Another sector where the real estate partner can provide both real estate expertise and relatively inexpensive access to capital to the service provider will be healthcare. Assets such as hospitals and high-end laboratories need access to significant real estate. Usually, either the hospital acquires the real estate or rents it. There is potential going forward for institutional platforms to purchase land to be leased to hospitals. The key to the strategy mentioned above versus piecemeal renting of hospital land is the ability of the platform to source capital at a significantly lower cost versus what the hospital chain can do.

The healthcare real estate focused platform may able to do so for a variety of reasons such as having access to a pool of investors with a lower cost of balance sheets and better credit ratings. Both the factors will provide a lower cost of capital. Additionally, for platform investors, a diversified pool of real estate assets does lower the risk profile through diversification, which in turn reduces the cost of capital for healthcare real estate asset.

Such innovative real estate strategies will be vital to fuel the next phase of growth for real estate-heavy sectors such as healthcare. The ability of healthcare providers to focus on healthcare services and have a less demanding debt-burden will be a significant value creator in the ecosystem. Real estate-focused investors, funds and, eventually, healthcare Real Estate Investment Trusts (REITs) will provide a liquid capital base with which to scale business.

Ultimately, investor-access to platforms that allow for some degree of secondary market liquidity will further help reduce the cost of capital for businesses. A combination of innovation in real estate and the “capital structure” that drives the real estate will be significant business drivers.

The previous strategy or some modified version of it will apply to many of the new sunrise sectors. A sector such as datacentres is also a component of a differentiated real estate strategy, whereby a combination of technological capacity combined with real estate acumen will drive the data centre real estate play. In an economy such as India with a structural demand, value creation opportunities abound.

A word of caution: A thorough analysis of demand-supply dynamics will be critical for long-term success. Given the very nature of real estate, both macro and local factors have a significant influence on investment returns. Past experience suggests that when local factors are ignored, investment returns can be adversely affected even with positive macro fundamentals.




Afreximbank signs MoU with Russian Railways and Russian Export Centre

The African Export-Import Bank (Afreximbank) said it has signed a memorandum of understanding with Russian Railways and the Russian Export Center (REC) to cooperate in implementing export and investment projects in the railway sector in Africa.

Under the terms of the MoU, the parties will undertake mutual consultations on export and investment projects abroad and by jointly developing project financing schemes in the sector.

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Afreximbank president Benedict Oramah signed the deal on behalf of the bank in Russia while Oleg Belozyorov, director general of Russian Railways, and Andrey Slepnev, director general of REC, signed for their respective organisations.

Oramah said Africa needed investments of $20-billion a year in the rail sector in order to bring it up to required level.

He said that Afreximbank’s role was to find partners that would help it to deliver the necessary investment and that the signing of the MoU would enable Russia to participate in the opportunities that existed in Africa.

Slepnev said the agreement was a demonstration of practical collaboration among the institutions and expressed confidence that it would bear fruit.

Russian Railways is reputed for developing and advancing technologies and techniques for effectively managing railway systems.


10 massive projects the Chinese are funding in Africa

China is Africa’s biggest and strongest ally and in recent years has pumped millions of dollars into the continent, funding one mega project after another.

At the close of the 2018 China-Africa Forum for Cooperation (FOCAC) summit held in Beijing, the world’s second biggest economy announced that it had set up a new $60 billion kitty meant for Africa’s development as part of a raft of new measures to strengthen Sino-Africa ties.

The fund, which is broken down into several parts, will be channelled to projects aligned to the Chinese government’s Belt and Road Initiative covering telecommunications, construction of roads, bridges and sea ports, energy, and human capacity development.

Considering that, here are ten million-dollar projects in Africa which are standing today and others are in the pipeline thanks to Chinese money.

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  1. Railways projects

At least five African countries have had their railway systems funded by China: Kenya, Ethiopia, Angola,  Djibouti,  and Nigeria.

Kenya’s largest infrastructure project since independence, Mombasa-Nairobi Standard Gauge Railway, was funded by China at an estimated cost of R57.2 billion.

In Ethiopia, China has funded two railways projects; Addis Ababa Light Rail Transit and Ethiopia-Djibouti Railway.

  1. AU Headquarters

The Chinese-built and financed African Union Headquarters.The R3 billion African Union headquarters located in Addis Ababa, Ethiopia was fully funded and built by China.


  1. ECOWAS Headquarters

In March 2018, West African regional bloc ECOWAS signed a deal with China to build their headquarters at Abuja at a cost of R475.7 million ($31.6 million).


  1. Ghana’s Bauxite Exploration

In 2017, Ghana agreed to a R150 million bauxite exploration deal with the government of China aimed at further exploiting the West African country’s vast solid mineral deposits.

  1. Angola’s Caculo Cubaca Hydropower plant

In 2017, Angola signed a deal with China for the construction of the Caculo Cabaca Hydropower project in Dondo, Angola.

The project is worth R67.7 billion and is set to produce 2,172 megawatts of electricity. The project will take about seven years to complete.

A similar project is ongoing at the Kaleta hydroelectric facility in Guinea, worth R3.8 billion, with China funding 75 per cent of the project.


  1. Congo’s Special Economic Zone

China will be investing in the Republic of Congo’s Special Economic Zone. The zone will be build in Pointe Noire in what China calls a “direct investment” and not a loan or gift.


  1. Nigeria’s Edo State Oil refinery

Nigeria and China signed a deal to build an oil refinery in Edo State at a cost of R30.1 billion.


  1. Zambia’s cement factory

China is responsible for a number of projects in Zambia including the China National Building Material which was recently launched by President Lungu. The project is worth R7.5 billion ($500 million) and will be completed in two phases.


  1. Egypt’s new city

Shanghai-listed developer China Fortune Land Development is set to invest up to R301.1 billion to build an upmarket residential district, an industrial zone, schools, a university and recreational centres in a new city in Egypt.


  1. Zimbabwe’s new parliament

Before President Robert Mugabe was ousted, China presented the former head of state with a million dollar gift: a new parliament.The new parliament building, a donation from the Chinese government, was expected to be built in Mount Hampden about 17 km from the capital, Harare, at an expected cost of R2.1 billion.

SOURCE: businessinsider.co.za


Global construction industry to reach an estimated $10.5 Trillion by 2023-Report

The Growth Opportunities in the Global Construction Industry report has indicated that the  global construction industry is expected to reach an estimated $10.5 trillion by 2023, and it is forecast to grow at a CAGR of 4.2% from 2019 to 2023.

The future of the global construction industry looks good with opportunities in residential, non-residential, and infrastructure. The major drivers for the growth of this market are increasing housing starts and rising infrastructure due to increasing urbanization and growing population.

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Emerging trends which have a direct impact on the dynamics of the construction industry include increasing demand for green construction to reduce carbon footprint, bridge lock-up device systems to enhance the life of structures, building information systems for efficient building management, and the use of fiber-reinforced polymer composites for the rehabilitation of aging structures.

Construction industry companies profiled in this market include China State Construction Engineering Corporation, China Railway Group Limited, China Railway Construction Corporation, Vinci SA, and Grupo ACS.

Within the global construction industry, the residential segment is expected to remain the largest segment. Financing for residential construction projects has become available with improvements in market fundamentals, like lower interest rates. The residential segment is expected to show above average growth during the forecast period.

Asia-Pacific is expected to remain the largest market during the forecast period mainly due to increasing urbanization, higher expenditure on infrastructural development, and affordable housing projects.

SOURCE: businesswire.com

US to provide $300m funding for Kenya Geothermal project

Kenya is set to receive US $300m from Cyrq Energy, an American company specializing in renewable energy production, for the construction 330 MW geothermal power plant in Suswa, Narok County, in south-western Kenya.

Nicholas Goodman, President and CEO of Cyrq Energy, confirmed the reports and said that a feasibility study has already been carried out on the site and regulatory approval request has been sent to the competent authorities.

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“The first phase of the project will be financed internally, with a mix of equity and debt, while long-term debt will be guaranteed for the other phases of the project,” said Nicholas Goodman

The CEO further added that the company plans to start producing 75 MW within two years of the Kenyan authorities’ approval. The overall project is set to take an average of 3 to 4 years before completion after which electricity is first sold to the utility firm -Kenya Power under a long-term 25-year power purchase agreement.

Mr. Nicholas Goodman and independent experts from the company assessed the geothermal resources available through a drilling programme and a study ranging from preliminary design to installation of the power plant, planned before the beginning of the project

Upon completion, the project is expected to further boost Kenya’s capacity which already ranks as the leading geothermal energy producer in Africa.



Dangote bids for Kenya’s ARM Cement

Africa’s richest man and owner of Dangote Cement ,Aliko Dangote, has revealed to be among bidders for Kenya’s struggling ARM; a cement maker company currently under the administration of accounting firm Price water house Coopers (PwC).

The business man, without naming the acquisition target; which in his opinion fits the ARM company, said he is in talks over buying it. “There is a company which has operations in Tanzania, Kenya and Rwanda which we are in talks with to see if we can take it over,” he adds.

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ARM portfolio in Kenya includes a clinker and cement grinding plant in Kaloleni and a cement grinding plant at Athi River. The company also manufactures imports and sells cement in Rwanda through its wholly owned subsidiary, Kigali Cement Company. In Tanzania, ARM runs limestone, clinker and cement plants through its subsidiaries, Maweni Limestone Limited and ARM Tanzania.

The company has been facing a number of challenges due to severe electricity rationing, inadequate supply of coal and stiff completion in the market.This has resulted to a negative equity of US $23m meaning that current shareholders will suffer a major dilution if a takeover deal is concluded.

On their side, the PwC said the process of selling ARM or part of its assets was being handled by South African banking giant Absa, which was appointed as the transaction adviser.

“Various parties have been in contact with the administrators expressing interest in the company’s businesses and assets in both Kenya and Tanzania,” the administrators said in a report to ARM’s creditors.

More bids are set to be received until December 3, after which shortlisted firms will be allowed to start their due diligence, including interviewing management.

Dangote Cement, which has about a 45% market share in sub-Sahara Africa, has long held interest in venturing into Kenya – with plans underway to build two cement factories by 2021.

Dangote admitted that Kenya is on its priorities and said there are plans to build two plants of 1.5 million tones annually. If the deal sails through, Dangote will take over the manufacturing premises, well-established distribution networks, and mining licenses.

SOURCE:Bloomberg News

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