Ethiopia

Speculative office development activity rising

The demand for office space primarily stems from the administrative, insurance, and banking sectors, which typically opt to construct or develop their headquarters rather than leasing office space. Nevertheless, there is an increase in the supply of speculatively developed office properties, particularly concentrated in the central areas of Addis Ababa.

The surge in speculatively built office properties has piqued the interest of tenants, some of whom are considering relocating from lower-quality accommodation.

While much of the existing office stock does not meet international standards, there are exceptions, such as the c.16,000 sqm National Oil Company (NOC) building in Bole, recently chosen by the World Bank as their Ethiopian Headquarters.

Parking availability remains a critical factor influencing rents, and indeed this has prompted the expansion of the NOC complex, with the addition of a new adjacent building to improve the office-to-parking ratio.

Challenges for the retail market

Currently centred around markets and ad-hoc high-street style units, Addis Ababa’s retail landscape faces challenges linked to declining footfall and revenues. This weakened performance is linked largely to the high levels of inflation which stood at 26.2% in March and has been responsible for the erosion of disposable incomes.

Furthermore, many malls are rapidly aging and are considered to be outdated. This includes While Century Mall (completed in 2017), Gast (completed in 2019), and Zefmesh (that opened over 10 years ago).

To ensure sustained footfall, retail developers are bringing forward mixed-use schemes that incorporate retail on the ground level, which has been well received by retailers.

When it comes to new supply, the second phase of Eagle Hills' La Gare project is underway and will introduce further residential units, two hotels and a retail mall that is expected to be delivered at the end of 2025.

Stability persists in the industrial market

With the country entirely reliant on Djibouti for maritime deliveries, the inauguration of a railway connecting the port of Djibouti to Addis Ababa in 2018 has been instrumental in facilitating trade.

Despite Ethiopia's lack of a seaport, government incentives designed to facilitate the Addis Ababa’s emergence as a regional trade hub are expected to boost demand for warehousing.

Challenges, however, still remain. The textile sector, for instance, has experienced a decline in growth since Ethiopia's removal from the African Growth & Opportunity Act treaty, which was in part driven by the conflict in the north of the country. This, coupled with challenges such as a severe shortage of hard currency, as well as the political and economic instability, has prompted some American and Chinese textile companies to reconsider their presence in Ethiopia, denting demand for warehousing.

An expanding residential sales market

The high-end residential market of Addis Ababa encompasses key neighbourhoods such as La Gare/Commercial District, Kazanchis, and Bole. Demand is centred on secure, well-conceived developments in sought-after areas. Bole, for instance, is a popular district for expatriates and affluent Ethiopians, boasting good housing options and proximity to essential amenities.

Similarly, Kazanchis and La Gare offer central locations that appeal to international buyers. Rock Stones' Kefita high-rise development and Eagle Hills La Gare medium-rise apartments have sold well, although the sales have taken longer than expected to complete.

The growing level of purchasing activity has resulted in development activity extending to areas like the Old Airport, where proximity to the International Community School and diplomatic missions are acting as further demand catalysts.