Ghana
Ghana has taken longer to recover from the effects of the COVID-19 pandemic when compared to its regional peers. High inflation rates which peaked at 54% in December 2022 (and eased to 23% at the end of last year) have added to the economic malaise. Signs of positivity in the real estate sector are emerging, with falling speculative office development, for instance, pointing to a recovery in office rents in the near term.
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A slow post-COVID recovery for the office market
Like elsewhere in the world in the immediate aftermath of the pandemic, occupiers have been reassessing their office requirements, most with a view to reduce footprints. On average, vacancy rates in Grade A office buildings immediately after the pandemic stood at around 20-30%.
Subsequent competition for tenants resulted in landlords not only offering greater flexibility on lease terms, but also drive some to reduce headline rents. Monthly prime rents in 2019 were in the mid US$ 30s psm, but these declined to the low-mid US$ 20s last year.
The ensuing ‘race to the bottom’ for headline rents has prompted some occupiers to boost their footprints over the last 6-9 months, which contributed to the recovery in prime rents, which now stand at around US$ 28 psm.
Pressure building on residential sales prices
Investor interest in the residential sector remains robust, with many seeking assets perceived as a hedge against inflation. This has contributed to the strong performance of Accra's residential market.
Developers have reacted to this increase in demand by building apartments in prime areas and houses further afield. While the demand for the best quality units remains strong, the market is starting to soften against this increase in supply. Asking prices are beginning to weaken, and payment terms are becoming more flexible.
Subdued industrial activity
The main industrial areas in Ghana encompass Accra, Tema, Takoradi, and Kumasi, with Tema being the largest, incorporating the Free Zone Enclave.
The Ghanaian industrial market, while relatively compact, has faced subdued activity amid recent economic challenges. Predominantly comprised of older grade B units, available properties often lease for as little as US$ 2-4 psm per month. Notable exceptions include grade A warehousing developments by Agility and LMI within the Tema Free Zone.
After experiencing high vacancy rates of around 30% between 2020 and 2022, leasing activity has risen, boosting occupancy levels in developments by Agility and LMI.
Retail rents stabilise
The retail sector has been slow to rebound from the impacts of the COVID-19 pandemic, a challenge that has been exacerbated by the devaluation of the cedi. In 2022, the currency depreciated by 30% against the US dollar, followed by a 27.8% depreciation in 2023. So far this year (as of May 16, 2024), the cedi has lost another 13.7% of its value, according to Bank of Ghana.
The impact of this has been particularly pronounced for formal retailers who rely on imported goods bought in cedi. Landlords have been responsive to this dynamic, with all major shopping malls owners adjusting rental rates downwards during 2022 and throughout H1 2023.
Rental rates have since stabilised, and vacancy rates have decreased across most major malls. By the beginning of 2024, Accra Mall, for instance, was nearly fully leased.