Majority of Accra’s planned hotel developments on hold
While it seems that the total stock of internationally branded hotels in Accra is set to almost double, only 14% of the pipeline projects are actively under construction as many have been stalled due to the impact of the pandemic and currency depreciation, according to the Accra Development Pipeline Report by pan-African real estate data company Estate Intel.
Trevor Ward, managing director of W Hospitality Group, who Estate Intel spoke to explained, “For 2021 year end, Accra was 40% down on revenue per available room (RevPAR) compared to 2019, which is not bad compared to Nairobi (50% down) and Johannesburg (65% down in Sandton). While, the market is currently oversupplied, it can be temporary if the oil sector picks up pace, and if there are new government initiatives to encourage tourism, just like it was done in the ‘year of return’ in 2019.
In a related trend, the office sector remains relatively subdued. A large proportion (33%) of the development pipeline is on hold potentially due to the pandemic’s impact on the sector.
Dolapo Omidire, CEO Estate Intel said, “Overall, the office sector in Accra has been impacted by the significant layoffs and space reductions that came with the Covid-19 pandemic, therefore impacting the sector with vacancy rates remaining high at 20% and 25% in grade A and B offices respectively. However, leasing activity has started to recover with new entrants expected to make a comeback in 2022. Still currency depreciation has continued to impact on developers’ access to financing, impacting on the overall pipeline.”
However, other sectors such as mid-low end residential seem to be performing better. According to Estate Intel, there are up to 800,000 residential units in Accra, with the development pipeline currently consisting of only 23,000 units. This is just about 3% of the total stock, with the majority of this pipeline (80%) falling within the middle income to affordable sectors. However, demand remains high in these segments pointing to an exciting opportunity for investors and developers due to the domestic nature of demand in this segment.
Omidire explained, “Demand in the residential sector is quite nuanced in the market. While occupancy rates remain low in the prime residential segment due to a decline in demand from expatriates and multinational employees against the backdrop of the pandemic, the mid-low end residential segments have continued to record relatively high occupancy rates owing to the domestic nature of demand.”
On the outlook for the market, Estate Intel points to the current macro-economic environment as the main driving factor.
“While Accra is often regarded as a soft landing into West Africa due to its favourable economic policies and tourist friendly tone, recent monetary measures by the national government have served to dampen investor appetite. This currency depreciation has led to challenges that include but are not limited to, an increase in construction costs and slowed down project financing. However, with the right balance in measures and incentives, market activity could pick up during the course of the year,” Omidire added.
