Tag: Development

We’re seeing urban renewal redevelopment taking place in cities, where old buildings are demolished to be replaced by new mixed-use developments. There is an increased need for effective use of space in both city centres, and property developers are responding.

Mixed-use developments offer the ability to live, work and play in close proximity within a secure precinct, providing a range of amenities while minimising travel time and expense. In an ideal scenario, these pedestrianised precincts can offer safety and security, convenience, sustainable technologies, connectivity and increasingly, green nodes in an urban setting.

Profica specialises in project management on projects throughout Africa and is also involved in the early-stage conceptualisation and pre-development planning on these types of projects. Our team has gained learnings from multiple projects across Africa, including the award-winning project management of Mutual Place in the heart of Sandton, a large super basement integrating five multipurpose buildings.

Mutual Place

Challenge in bringing mixed-use developments on stream

From a developers perspective, for mixed-use developments, the challenge lies in bringing a mix of residential, retail, and office buyers and tenants on stream at a particular time, which doesn’t necessarily coincide with the cyclical demand for these sectors in the property cycle. With African economies struggling, the biggest concerns developers have about mixed-use precincts is securing and keeping tenants at the right time.

Large ‘ego’ projects which make limited financial sense can take a long time to reach success, for example, Eko Atlantic in Nigeria and some of the high-rise towers in Nairobi, as they don’t follow the property investment fundamentals. We must understand the objectives, purpose and functionality of mixed-use precincts and how they actually work. Of course, our clients and investors require their developments to be financially viable and they need to be planned with return on investment in mind.

Local government, the private sector, economic development agencies, the community, multiple development teams and possibly multiple owners must collaborate to address planning, management, capital resources and risk.

Effectively financing a multi-phased mixed-use project, addressing environmental, transportation and infrastructure issues and having a clear insight into the expected market demand for a mixed-use development are some of the challenges that must be tackled in a collaborative master plan.

Large cost of infrastructure

Too often, large mixed-use precincts have failed during the first phase, due to the large cost of infrastructure required in phase one to enable the developments going forward. We recommend that one master plan coordinates a number of different developments, each of which can develop according to demand. So it’s about planning for a final product – an integrated mixed-use development – but also one which can be constructed in various stages at different times and still provide a good environment for the users during development.

While challenging, designing, owning, or managing a mixed-use facility opens the door to multiple opportunities. Mixed-use facilities not only conserve valuable land resources, but also present opportunities for building efficiency, energy efficiency, and sustainability. As space is used 24 hours a day, developers and owners can make it work harder in terms of returns and also find ways to be more energy efficient in the long term, sharing services, parking, and other amenities on a countercyclical basis.

However, while sustainable and green efforts are increasingly important to owners as improved energy efficiency can save on costs, they also assess whether the financial return on investment is worth it when choosing systems and materials. Going green requires a very big shift from first-cost thinking, to life-cycle cost thinking.

As Profica works on more mixed-use projects, different approaches to the fundamentals of space sharing and optimisation are emerging. Parking, for example, provides real opportunities to save space when managed carefully. We’re seeing shared countercyclical parking provided for office use during the day, residential at night. Creative ways to manage challenges such as waste, smells, traffic, and noise transferring from one use of the building, such as a busy restaurant or shop, to residential areas are also being found.

Future-proofing developments

The importance of future-proofing developments is key, allowing for changes of use in the future. For example, with more efficient public transport coming online in Sandton, the large basement parking areas in some of the corporate office building will not be fully utilised. These areas, if planned for, can then be used later for ‘last mile’ logistics in congested city centres or if the parking areas are above ground, it’s worth making the height between floors higher so that the areas can be converted to commercial space later on.

It’s also not just about the mix of uses, but within each use, there are specific variances that need to be considered. For example, residential units for rental in city centres are designed with rental affordability in mind, essentially a different product from owner-occupied units which are longer-term. These nuances all affect how the mixed-use developments integrate and provide amenities for the different residents and visitors.

Overall, mixed-use developments are very positive and, if carefully managed from the outset, provide major returns on investment. Enabling people to live, work and play in a well-designed precinct fundamentally transforms lifestyles and we expect the trend to continue across Africa.

Success of a mixed-use development depends on the following factors:

Financing – Because a mixed-use development generally requires phased-in development periods, it may be difficult to finance compared to a single-use project of a similar size due to the various asset classes included in one development. The type of tenants and the strength or covenant of these tenants will have an effect on the funding parameters.

Market demand – For a project to be a success, it must attract a significant level of market demand in its own right. Market analysis to assess the supply and demand for proposed multiple uses is critical. Typically different sectors have varying rental strengths and vacancies from each other and are at different points in the property cycle at any given time.

Effective design and project management – Developing a master plan for a mixed-use development is critical to the financial success of a project. It must allow for phasing and not encumber the first phase with too much enablement and infrastructure cost.

Public and political support – Community members and key stakeholders need to be engaged early in the project. Development plans need to highlight infrastructure and transportation use, the economic benefits of the project to the community, regulatory challenges, conformance to zoning codes and availability of developer incentives. Don’t underestimate the impact the neighbours and local residents can have on the delivery of such projects.

Site location, size and topography – Site access, connectivity to other land uses, access to multiple modes of transportation, and vehicle and pedestrian circulation systems are some of the critical factors for project success.

Young Nigerians are becoming more audacious in the pursuit of independence and are constantly channeling energy into taking risks and establishing companies of their own. They have the advantage of moving fast ahead of traditional, commercial, and residential shelter arrangements, and are quite adept in adopting the flexibility and economic benefits provided by shared living and working spaces instead. As a result of this, the real estate industry is forced to follow the trend and restructure as technology increases the power of consumers.

Alternative real estate options

The needs and preferences of the Nigerian populace will always change in response to economic changes, inflation, and others; property developers are expected to adapt their developments to meet the needs of the market. The growing demand for alternative real estate options for a new demographic-based economy like co-living spaces, crowdfunding, and even build-to-rent are new trends that cannot be ignored. Evolving the industry will require a collective effort of all stakeholders.

At a projected population of 263 million by 2038, the housing situation in Nigeria calls for immediate intervention. Today, the Nigerian real estate sector is faced with a housing crisis. The housing deficit in Nigeria is estimated at 17 million and growing at an average of 20% yearly and with the bulk of the pressure on urban communities for obvious reasons. The housing sector estimates an output of no more than 100,000 units per year to an optimistic 200,000 units per year, which covers only a fraction of the at least 700,000 units required per year to keep up with the growing population and urban migration. Furthermore, most new housing production caters to upper-income households, leaving an acute housing shortage for middle and lower-income households.

Delivering affordable housing

This challenge for the provision of affordable housing in the country can only be addressed by strategically planning to sustain growing communities. The Nigerian government is depending on several strategies for delivering affordable housing. The public housing provision remains a common approach, as states are looking to the private sector to address housing shortfalls through public-private partnerships (PPP) and targeted interventions.

With the recent pandemic, recession, and inflation, the Nigerian housing sector struggles even more. Following the Covid-19 pandemic, world economies are experiencing a downward slope that has caused a recession in many nations, affecting thousands of businesses worldwide, real estate included. A downward slope of the general business economic cycle is usually accompanied by a decline in the demand for properties; this means fewer people can afford to buy or build houses. Though the resulting effect is that prices of houses on sale drop gradually and as the economy gets tougher and demand slumps, but interestingly, the prices of rental houses increases. The recession forces the populace to pause all property purchases and focus on property rentals instead. Here’s why:

A rise in the inflation rate will usually result in a reduction in the selling price of properties mostly due to the slow turnover process, that is, fewer properties are being sold which leads to a higher volume of properties on the market and a corresponding increase in a competitive rate. The rental market almost always experiences growth. As the buying power of Nigerians reduces with the growing inflation, more people would rather continue to rent and wait for a more suitable time to buy a property. As more people seek rental options, the demand for rental properties increases, and we know from the concept of demand and supply that when demand goes up, supply reduces, and price increases. The average property owner will likely increase rent simply because there are more people willing to rent their property and they too will have to deal with the price hike of other products and services.

Another major reason for the dwindling performance in the property market may be the unstable nature of disposable income among buyers. GDP development over the last three years has been consistently listed below population growth, implying decreasing per capita income.

On the part of the developers, the property development sector is extremely responsive to economic changes and surviving in a recession can be a challenging task. There are varying factors that interfere with the pricing of a property, including infrastructure, land cost, cost of securing building approval, cost of construction materials as well as labour cost. All these costs are ultimately transferred to a buyer purchasing the property.

The way forward

The boom-bust cycle of real estate prices has caused developers and investors alike to consider a new residential scheme: ‘build-to rent’. Build-to-rent has been around for a few years now, but, in the grand scheme of things, it’s still a relatively new concept. The build-to-rent scheme is designed with the intention of appealing to investors looking to play in the rental property market as opposed to long-term homeownership. This scheme can range from commercial to residential and also industrial property. In residential schemes, a developer builds mainly apartments, usually close to commercial and business districts, with the sole purpose of selling to investors that intend renting it to people in exchange for monthly or annual rent.

The build-to-rent scheme focuses on delivering housing solutions to renters across all demographics. As explained above, the current situation of the country has made homeownership difficult, the recession and inflation have caused a scarcity of funds, and purchasing a home has become an afterthought for the populace. Nigeria’s annual inflation rate rose to 13.22% in August 2020 from 12.82% in the previous month, accompanied by high and volatile interest rates. Among the varying problems caused by inflation is the reduction in pricing power.

Development of affordable housing, transitional housing, and apartments, rather than luxury duplexes, accommodates more housing units, thereby making the houses more affordable to a larger group of middle-class buyers and home investors.

Also, with the provision of better mortgage financing by our financial institutions, investors won’t have to break the bank to purchase developed properties that they can easily place back in the market for rental returns. When the inflation rate is high and buying power is low, investors will naturally drift towards long-term payment than outright purchases.

Following these steps will help address the needs of renters, investors, developers, and all stakeholders in the Nigerian real estate market.

Titled Measurement of land for planning and development purposes, it provides clear definitions for measurements widely used in the property and built environment sectors, advocating consistency worldwide. Five core definitions have now been formalised by RICS to assist with the global measurement of land. They are:

Land ownership area (LOA): An area of land, measured on a horizontal plane, which is held in a single legal interest or title by one or more legal owners, which may be the subject of a proposed or actual sale, letting or other disposal, valuation or compulsory purchase, and which may comprise all or part of that single legal interest or title.

Site area (SA): The total land area on which development authorisation is sought, measured on a horizontal plane.

Net development area (NDA): The extent of the site area upon which one or more buildings or other operations and their ancillary space can be built, measured on a horizontal plane.

Plot ratio (PR): The ratio of total development floor area to SA. Development floor area may be measured as gross external area (GEA) or gross internal area (GIA) but whichever is used or modifications of them should be clearly stated.

Floor area ratio (FAR) and floorspace patio (FSR) are similar terms, used interchangeably in some jurisdictions to reference the same point. For consistency, PR should be used wherever possible. Where jurisdictional requirements are for the use of either FAR or FSR, PR should be reported as well.

Site coverage (SC): The ratio of ground floor area (measured in accordance with GEA) to SA, expressed as a percentage.

A key difference with the new guidelines is that calculations of density should now always be expressed in terms of gross density (based on SA), rather than on a net basis, with net density providing an additional and complementary metric for understanding the intensity of development of a site.

The Measurement of land for planning and development purposes can be read here.

SOUTH AFRICA

The guidance is lead-authored by one of Britain’s foremost urbanists, chartered surveyor and town planner Jonathan Manns, executive director at Rockwell, who said: “Land measurement is a vital day-to-day component of real estate and this guidance introduces, for the first time, clear and fixed definitions to assist with that process.

“In doing so it establishes international best practice to be used whether buying, selling, evaluating, valuing or developing land.

“This has the potential to profoundly improve consistency, once in regular use, to the benefit of both professionals and the general public alike, in countries around the world.”

Work-from-anywhere drives digital infrastructure and supply chain investment

The shift to hybrid work-from-anywhere (WFA) workforce management strategies, which are expected to remain even post-pandemic, has been a key driver of accelerated digitalisation. Though necessitated by hard lockdowns around the world in 2020, businesses have found that the right balance of in-office work and work-from-home can result in considerable cost savings, improved employee wellbeing and increased productivity. Africa is no exception to this trend and this is driving investment into improved digital infrastructure. Data centres are being updated, upgraded, expanded or built to support this more digitalised workforce. These are mission critical facilities, and we are working with our clients to ensure that their facilities and systems are designed to the highest standards of resilience, redundancy, level of fault tolerance, security, and maintenance, while respecting budget constraints.

The same trend is driving investment into bigger, better, more sustainable warehousing facilities. E-commerce was already a growing sector worldwide before the pandemic and went into overdrive as lockdowns forced people to do their shopping from home. Retailers have had to rethink their entire supply chain, including warehousing and logistics, and third-party logistics businesses have also had to respond. In the US and elsewhere, fulfilment centre footprints are being optimised and redesigned to take advantage of this new boom in e-commerce.

In Africa, we have seen big retailers, who have been successful even in these trying economic times, developing large and centralised greenfield (new) warehouses and distribution centres, driving efficiencies in how they manage their distribution and supply chains. Through considered and strategic investments in establishing warehouses and distribution centres in good, centralised locations, these businesses are able to be more astute in their procurement and processes.

As engineers, we work with developers to ensure we are leveraging available improvements in design technologies and philosophies. The trend is towards increasing upfront expenditure to reduce operational costs throughout the facility’s life cycle. Operational costs over the life cycle of a facility are substantially higher than the initial capital costs – where maintenance to joints, repairs to machines and downtime, for example, result in far higher costs over a 20-year period if not designed correctly up front. As such, we are seeing the benefits of advanced floor technology designed to increase panel sizes, reduce joint linear metres, and improve joint performance through high specification joint products.

The healthcare imperative reaches new heights

The provision of healthcare services across Africa has long been a major trend in property development, and the pandemic has brought a new sense of urgency to this space. While there remains definite scope in Africa for high-tech and high-performance hospitals that deliver state-of-the-art care, this is not the sole focus. Particularly in remote and rural areas – where even basic healthcare and medical services may be lacking – a more decentralised approach can bring care to where the people are, is needed.

Place-based wellness centres, which create an opportunity to leverage a larger number of smaller facilities to deliver quality services and care across wider geographic areas are still desperately needed across the continent. And whether these take the form of a standalone facility in a remote area or an add-on to existing primary healthcare clinics within the same complex, placed-based community wellness centres can be designed and constructed with modular units to make them flexible, adaptable and fit-for-purpose to the evolving needs of the communities they serve.

In addition to healthcare facilities, Africa’s need to build pharmaceutical manufacturing facilities has also come under the spotlight. Importing vaccines against Covid-19 instead of manufacturing them in country may be top of mind, but expansion of Africa’s capability to manufacture other drugs and vaccines has become an imperative. And we are seeing investors rise to the occasion.

Tourism remains commercially viable

Finally, and perhaps surprisingly in the current context, investment into hospitality in Africa is also on the rise. Property developers are preparing for an increase in tourism throughout Africa when travel restrictions ease, and we are working on several new hotel projects, for example. Travel in Africa is affordable compared to much of the developed world, and increased leisure tourism is expected.

In addition, work-from-anywhere means many traditionally office-based workers may choose to work from non-traditional locations in the not-too-distant future. African destinations like Mauritius are already offering so-called “nomad visas” – allowing people to live and work in Mauritius for up to a year without making any major investments in starting up a business or finding local employment. Investors are preparing for an increase in people choosing to work from the beach or the bush, rather than in the big city.

These trends are encouraging for Africa’s commercial property recovery post-pandemic, and as engineers we must keep sight not only of our clients’ immediate need to take advantage of these opportunities, but also of the sustainability of the projects we design today. Buildings are the foundation of our communities, but their emissions also add to existing climate crisis pressures. To continue to thrive, society needs net-zero buildings. This means not only designing and constructing new net zero buildings, but rethinking retrofit to prepare our existing buildings for a low-carbon future. These are the challenges we’re helping developers, contractors, architects and local government tackle today.

The project will be executed in two phases, with completion of the first by 2025 at an investment cost of about $1.6bn. The second phase, with an estimated cost of about $1bn, is to be completed over a further three years.

Targeted production capacity for the first phase is one million tonnes of methanol and 400,000 tonnes of ammonia per year.

The US is among the largest foreign investors and donors in Nigeria with annual trade between the two countries at over $10bn, according to the State Department.

US ambassador to Nigeria Mary Leonard said the new consulate, to be built on land reclaimed from the Atlantic Ocean, would take five years to complete.

Like most countries, the US has an embassy in the Nigerian capital, Abuja, and a consulate office in Lagos, a sprawling city of more than 20 million people and Nigeria’s major economic hub.

Despite recent investments in data centre infrastructure in sub-Saharan Africa, much of the continent’s capacity remains in South Africa, where local providers brought more than 50MW of dedicated data centre IT load capacity online between 2017 and 2019.

Data centres remain power hungry

Adding further complexity is the unavoidable fact that data centres remain power hungry. Approximately 10% of data centre operating expenditure is consumed by power costs according to Gartner. In Africa, unstable power supplies that are still heavily fossil fuel dependent and increasingly expensive are certainly posing a significant challenge for the data centre industry to contend with.

Over-and-above the critical importance of a stable power supply, responsible corporate citizenship and meeting environmental, social, and governance (ESG) practices combine to put significant pressure on data centre owners to service the continent and ensure that Africa can keep pace with the rest of the world.

Clearly, increased capacity must be designed and built with stable power supply and net-zero targets in mind. Managing energy efficiency is core to achieving this. Since you cannot manage that which you do not measure, the power usage effectiveness (PUE) metric has become a de facto industry standard for measuring how efficiently a data centre uses energy. To improve efficiency, data centres need to deploy heating, ventilation, and air conditioning (HVAC) technology that will deliver a low annual average PUE.

Strategies to increase energy efficiency

A few years ago, the annual average HVAC PUE’s were around 1.9. Current PUE figures hover around 1.5 and there is constant effort going into lowering this to 1.0. Incorporating free cooling, free heating and specifications on the efficiency of operating equipment in the HVAC designs lowers the annual energy utilisation and drives down the annual average PUE.

Another strategy to increase a data centre’s energy efficiency is widening its internal temperature and humidity range and performing upfront planning to ensure ease of maintenance. It is also important to consider improving the power usage of IT equipment by lowering the payload power that it requires. Servers consume 60% of this, so that further efficiencies can be realised by cleaning up server workloads and eliminating unnecessary usage, virtualising more workloads and replacing older and less efficient servers with new ones.

Finally, data centre owners need to optimise physical data centre space, particularly for data centres that were built before server virtualisation became commonplace. Less space needed equates to less cooling and thus power savings.

Alternative energy solutions

Energy efficiency improvements alone will not stabilise power supplies, though. In the urban context, renewable energy from rooftop solar PV panels can be incorporated into a build to offset some of the data centre’s reliance on the local grid. However, the power contribution from a rooftop solar microgrid would not be sufficient to meet the demand of a power-hungry data centre.

For this reason, we are seeing more interest in alternative energy solutions that comprise of a tri-generation plant using natural gas to power the data centre and off grid, with diesel generator backup for downtime periods. Important to this is securing a site in a hotspot area with access to gas lines to secure a consistent supply.

Though tri-generation and improved energy efficiency are all steps in the right direction, further thought must be given to renewable energy if net-zero is the goal. Fortunately, Africa’s potential for producing renewable energy is vast. The challenge is space, which is not readily available in urban centres.

Renewable energy plants and microgrids

To reach net-zero, data centre owners could look to trends out of other markets where investing in renewable energy plants and microgrids – like a solar or wind power farm for a large data centre – are showing promise. In Africa, this approach opens new opportunities to establish data centres in more remote parts of the continent that previously have not been considered due to a lack of infrastructure, but where space is more readily available. This approach feeds the data centre directly from its own self-sustainable supply of renewable energy, while also boasting cleaner energy use and improved carbon reduction.

In this context, the business case for solar is particularly strong. South Africa, for example, receives more than 2,500 hours of sunshine per year, with average solar-radiation levels ranging between 4.5 and 6.5kWh/m2 in a single day. The country’s average solar radiation of about 220W per square metre is more than double that of Europe (100W/m2). Solar, therefore, is one of the most promising renewable energy options to reduce dependency on the grid. The Northern Cape has become a hotspot for solar power plant investments given the impressive solar power generation potential in the area – and we have seen successful examples of solar-powered data centres being established in similar arid and desert type environments in other parts of the world.

Green building standards

While there is currently no set of industry standards for building “green” data centres, with the global shift towards net-zero driving the need for carbon reduction, we expect such standards will become a reality in the data centre industry in future. We have seen the trend play out in other commercial property spaces where green building has become a requirement for most major developers.

This shift will place more emphasis on the role of architects and consulting engineers to continue to produce alternative and operationally cost-efficient designs that reduce energy consumption, reduce carbon emissions and improve the overall operational efficiencies of new data centre projects.