UARE Lusaka Real Estate Report 2018

Lusaka Real Estate Market Report
LUSAKA |
Real Estate Market Report
2018

Foreword
Thank you for picking up this report. We hope you will find it interesting reading!
This report is based on data collected by the Urban Africa Real Estate (UARE)
team members over the last seven years where we have been active in Zambia and
is supported by our team’s more than 80 years of combined experience in African
real estate. We are excited to release our first comprehensive research report on the
dynamic Lusaka real estate market. We see the release of the report not so much
as the ending point of the process but rather as the start of an on-going
discussion with market participants, to enable all of us to understand this attractive
market better by increasing transparency and creating deeper linkages across the
value chain. We look forward to having discussions with all potential and active
market participants in order to learn more about the market and the opportunities
that lie within.
Zambia has emerged as one of the most attractive investment destinations in
Southern Africa based on its open and stable economy, its strong democratic
tradition, secure and peaceful operating environment and the general ease of
doing business. As a result, Zambia has, since 2000, grown its GDP at more than
6% p.a. and is expected to grow at an average of 4.5% p.a. for the next five years.
For real estate investors, Zambia hold the additional attraction of being one of the
most transparent property markets in Africa, combined with a good assets based
on strong international tenants with USD leases.
With a population growing at almost 5% p.a. and an economy growing at 8-10%
p.a., Lusaka is clearly the most attractive investment destination in Zambia. It
boasts some of the best malls in Southern Africa, outside of South Africa, and
many high-quality office buildings. As a result, international investors have been
active in Zambia, evidenced by the large amount of foreign investment in the
sector. UARE believe that the sector will continue to deepen and experience a
recycling of capital from developers to long-term owners, seeking yield.
Carl-Johan Collet
Managing Partner - UARE
1

2
UARE is a Lusaka- and Johannesburg-based group of internationally-experienced professionals focused on creating,
transacting & managing investment grade property assets
We are active in three segments:
§ Commercial property development - primarily convenience retail
§ Property corporate finance - for Zambian and international clients, alongside market research and
investment memorandum prospectuses
§ Commercial asset management - of proprietary and related party assets
Urban Africa Real Estate Group
$227m
transaction pipeline
$62m
development pipeline
$18m
assets under management
Team Member Responsibility Background Achievement & Impact
Carl-Johan
Collet
• Managing Partner
• Cap. raising & sales
• 17 years in property
• MBA, INSEAD
Developed over $160m of
real estate in Zambia in
7years
Bonna
Kashinga
• Finding land
• Business platform
• Property management
• 11 years banking, 4 years
property
• MPA - Harvard
Established & managed
$75m home loan book in
Zambia
Jan Van Der
Merwe
• Bank financing
• Strategy
• Man Partner, PAH Fund
• Africa Head , Standard
Bank RE
Invested over $600m in
African property
development
Basjan Van As
• Construction budget
• Construction
management
• 8 years of construction
management
• B.Sc in Project
Management
Managed construction of
$250m+ in 4 African
countries
Senior Management and Experience
60 room hotel 3,300m2 convenience mall
Acquisition of 7,000m2
shopping centre

Contents
The Southern African Region & Zambia
The Three Stories About Zambia
Zambia’s Economic Performance
Lusaka City Map
Lusaka - A City Growing Strongly
Lusaka Real Estate Investment Market
Investment Market
Transactions
Debt Availability
Lusaka Occupational Market
Retail
Office
Industrial
Residential
Hospitality
Student Housing
A View on the Lusaka Development Market
Appendix 1: Lusaka Spatial Development Plan
4
6
8
10
11
14
15
17
19
20
21
25
28
31
34
36
37
38
3

4%
5%
6%
8%
9%
10%
10%
11%
12%
15%
17%
22%
0% 5% 10% 15% 20% 25%
Mozambique
Uganda
Malawi
Kenya
Botswana
Tanzania
Zimbabwe
Rwanda
Namibia
DRC
Zambia
Angola
The Southern African Region & Zambia
Zambia is a lower-middle income country in Southern
Africa with a population currently estimated at 17.8
million, covering approx. 750,000km2. It is a safe, peaceful,
democratic country, which has benefited from good
macro-economic stability over the last 25 years. It has one
of the best educated work forces in the region and a large
diaspora that remits income and knowledge back into the
country.
Zambia is increasingly weaning itself of its dependence on
the copper mines and has many strong international
companies operating in the country, especially in retail.
Zambia, of course, does not exist on its own but is part of
one of the more dynamic regions in the world, which the
IMF estimates will grow at 5.2% p.a. through 2023, after
growing at close to that pace since 2000.
Africa has the world’s youngest population, which is
growing at nearly 3% p.a. and McKinsey estimates that by
2034 the working age population of Africa will be bigger
than that of China or India. The size of the urban
populations have increased 10 times in Sub-Saharan Africa
over the last 50 years. Over 60 African cities have
populations of over 1 million and by 2025 that figure will
reach 100, as urban populations are growing at close to
5.0% p.a..
To better understand Zambia as an investment destination
within Southern Africa, we believe it makes sense to
compare it against its surrounding countries. We have
therefore pulled together a group, that we call the
Southern Africa 12 (SA12), which incorporates Zambia
and its nearest neighbours. This covers: Angola, Botswana,
Democratic Republic of Congo (DRC), Kenya, Malawi,
Mozambique, Namibia, Rwanda, Tanzania, Uganda,
Zambia, and Zimbabwe. Excluded are South Africa,
Lesotho, Swaziland, Mauritius, Madagascar, and Burundi.
From a real estate perspective, it is clear that there a
substantial opportunity in these SA12 countries, when
compared to the Republic of South Africa (RSA). The
graphs to the right reflect this, indicating that SA12 has
90% less shopping centre space than RSA, and yet has a
517% larger population and 24% higher GDP (PPP).
Within the SA12 region, Zambia is in the middle of the
pack in terms of size of population and urbanisation, but
has the 2nd highest percentage of its population in its major
city (17%) – we will revert later on as to why this is
important.
Median Age, by country (2017)
Source: CIA Factbook
Percentage of Total Population in Main City
Source: World Bank, UARE
Source: Knight Frank, Broll, World Bank UARE
23
2
RSA SA12
Shopping Centre Space (MM of m2)
- 90%
54.4
335.8
RSA SA12
Est. Population (2018)
$795
$987
RSA SA12
Est. GDP PPP (2018)
+ 517%
+ 24%
GDP Growth p.a. 2019 – 2023 (est.)
1.8% 5.2%
4
|The Southern African Region & Zambia

Ease of Doing Business (SA12)
From a key economic indicator perspective, Zambia ranks
centrally in terms of the size of economy (5th of 12) and
GDP growth 2019-23 (ranking 7th). From a credit rating
perspective – which looks through short-term noise to the
long-term ability of government to service its debt –
Zambia is also centrally positioned, with a rating of ‘B’ by
both S&P and Fitch (and Caa3 by Moody’s).
So, Zambia is a strong mean performer but what is really
interesting for a property investor, is its real estate
investment climate. From a world-wide perspective,
Zambia is in the better half in terms of doing business
ranked 85 out of 180 countries in the world, comparing
well with South Africa (82). Within SA12, Zambia is
ranked 4th. In 2017, the World Bank noted that Zambia
was one of the top seven countries worldwide that had
shown a notable improvement in the rankings, due to
reforms in getting credit, paying taxes and trading across
borders.
Even more relevant, Zambia is ranked 3rd in the SA12 in
the JLL Real Estate Transparency Index, only bettered by
Botswana and Kenya. Out of the 100 most developed real
estate markets in the world, Zambia is ranked 56. South
Africa, Botswana and Kenya are ranked 21, 45, and 53,
respectively. Consequently, it is relatively easy for real
estate investors to access the relevant information and
property rights are well protected. Also important for
property investors is, that almost all commercial leases in
Zambia are denominated in US Dollars, decreasing
currency risks and allowing access to lower cost financing.
Having told the story of Zambia in the SA12 region, we do
not believe it is possible to understand the Zambian
economy by just looking at it from one angle. To date, the
best way we have found is to tell three stories – each of
these we outline below. We believe all the three stories to
be true and to collectively provide a ‘true’ view of Zambia.
181
175
159
138
137
122
110
106
85
81
80
41
DRC
Angola
Zimbabwe
Mozambique
Tanzania
Uganda
Malawi
Namibia
Zambia
Botswana
Kenya
Rwanda
Source: World Bank
GDPGrowthp.a.2019-23
Bots
Uganda
Angola
2%
4%
6%
8%
DRC
Kenya
Moz
Nam
Rw
Tanzania
Zambia
Zim
Malawi
Source: World Bank
GDP Growth vs Size of Economy (SA12)
97
90
85
84
78
56
53
45
Mozambique
Tanzania
Angola
Uganda
Rwanda
Zambia
Kenya
Botswana
JLL Real Estate Transparency Index 2018
Source: S&P, Fitch
S&B/Fitch Credit Rating of Rated SA12 Countries
Mozambique
DRC
Rwanda
Uganda
Zambia
Angola
Kenya
Namibia
Botswana A-
BBB-
B+
B+
B
B
B
B-
CC
Source: JLL
5
|The Southern African Region & Zambia

opportunity to dramatically increase its agricultural output
with only 10% of arable land currently farmed, 40% of
the water resources in Southern Africa and the most sun
hours in the world. In addition, the difference in yield for
a small-scale and a professional farmer is 5-10x, showing
that better farming methods could increase yield on
currently farmed land substantially. The availability of sun
and water also means that Zambia could potentially
become the battery of Southern Africa as it has great
opportunities for power generation (Zambia already
exports more than 100Mw of power). Finally, as Zambia
is ‘land-linked’, it has the opportunity to become a
distribution hub for the region.
Dual Track Economy
Like all developing countries, there is a big difference
between urban and rural incomes in Zambia. The top ten
percent of households in Zambia capture approx. 55% of
income and this part of the population is almost solely
based in the cities – especially Lusaka. We call this the
Urban Elite and this segment of the population can be
calculated to be c.1.7 million* and have a per capita
income of $7,000 – equal to a Botswana in Zambia.
This Urban Elite has the highest productivity and show
the level of capability that the average Zambian needs to
get to for Zambia to become a higher-middle income
country. That Zambia’s capital has a high percentage of
the total population residing there, is positive for growth,
as it creates economies of scale and a larger concentration
of capital, which drives demand for built space. As
urbanisation in Zambia – and across the region –
continues to increase, it will drive up productivity as those
previously employed in agriculture move towards more
productive work.
38%
40%
42%
43%
43%
46%
46%
48%
50%
57%
61%
61%
63%
Tanzania
DRC
Uganda
Angola
Zimbabwe
Mozambique
Malawi
Kenya
Rwanda
Zambia
Botswana
Namibia
South Africa
The Three Stories About Zambia
|The Three Stories About Zambia
Zambia has made significant social, economic and political
progress over the last decades, and is now recognised as
one of Southern Africa’s more attractive investment
destinations. The country is still riding the benefits from
the macro-economic reforms put in place in the 1990’s and
has achieved an average GDP growth of 6.2% p.a. since
2000. This has been a broad-based growth based on
improvements in productivity and entrepreneurship across
multiple sectors including mining, manufacturing,
agriculture, banking and telecommunications and has been
supported by substantial investments in infrastructure.
Story 1: Zambia is a developing country growing at 5-
6% p.a.
At the base of the stories to tell about Zambia is that it is a
rapidly developing country. With this comes rapid GPD
and productivity growth but also a need for formal job
creation and a broadening of the tax base. As in any
developing country, there is corruption and a need for the
politicians to learn how to run democracy and
government. One should not forget that at independence,
in 1964, Zambia had less than 10 university graduates.
While the enrolment in tertiary education is now more
than 4% of population aged 18-25, Zambia still has far to
go to raise its educational and health standards and a
substantial need for additional infrastructure investments.
This however takes money and consistent application. The
ability to continue to attract the international long-term
patient capital requires an on-going improvement in the
ability for that capital to easily access opportunity and to
do so at attractive risk/reward ratios. But all countries who
have reached higher-middle income have overcome these
challenges and so shown Zambia the path to take and the
tools to use.
There have been many factors supporting the rapid growth
of Zambia over the last 20 years including (a) a quickly
developing financial system with reasonable access to
credit, (b) increasing agricultural productivity, (c)
significant entrepreneurial activity, (d) better educated,
more experienced private sector work force based on a
growing output of university graduates, and (e) improving
road infrastructure and expansion of electrification. Other
key improvements that will have a long-term impact on the
development of Zambia includes universal health care,
increasing literacy and increasing quality of primary and
secondary education (although still far to go). On top of
significant copper resources Zambia also has a fantastic
Gini Coefficients - SA12
Source: World Bank
6*10% of total households in Zambia equates to 365,000, times by 4.7 people per household.

While high Gini coefficients – measuring the difference
between rich and poor – are normally seen as a bad thing
from a fairness perspective, for developing economies we
see high Ginis as a positive as it shows emergence of a
dual track economy (high Ginis in South Africa and
Namibia are for different reasons).
Lusaka is going to be the growth engine that moves
Zambia to a higher middle-income country (along with, to
a lesser extent, Ndola, Kitwe and Solwezi). As part of this
growth path, there will be a dramatic conversion from
informal to formal business, which will have a huge impact
on job creation and broadening of the tax base – and will
generate substantial opportunities for real estate investors.
Story 2: Less of a copper-driven economy: +/-2%
GPD growth impact
Zambia produces 4% of the world’s copper generated by
mostly world-class mining operations based in the
Copperbelt (Kitwe / Chingola / Ndola) and Northwestern
Province (Solwezi). Copper prices therefore have more of
an impact in the Copperbelt, than in Lusaka. Copper is
approx. 70% of Zambia’s exports. For many, Zambia is
seen as a resource-driven economy but we believe that this
is the wrong view to take as the mines only employ about
60,000 people (about 8% of the work force) and are
unlikely to increase employment or production
substantially. Although the mines do have a substantial
impact on the GDP growth rate. Based on our experience,
we would say a high copper price adds another couple of
percentage points to GDP growth ,while a low copper
price means that GDP growth is pulled down by a couple
of percent. A copper price of $3/lb is roughly neutral.
Story 3: Zambia is lightly impacted by the news-cycle
& politics: - +/-1% GPD growth impact
It is easy to confuse the short-term news cycle with things
that have a long-term economic impact. As an example,
the outbreak of Cholera in January 2018 in Lusaka hit the
news big time but had only a small impact on GDP
growth in the short term and no long term effect The
same thing can be said for a lot of the political noise that is
aimed at the local electorate but when seen from abroad
can seem impulsive. The major risk of the above story
relates to a default on the repayment of the Eurobond(s).
The reality of default means that the foreign investors that
bought the bonds will not get repaid on time, but will
eventually be repaid. The bigger impact will be on the
currency and the effects from a falling Kwacha. As we saw
in 2015, a falling Kwacha leads to inflation through
increased costs of imports. At that time, the Bank of
Zambia (BOZ) reacted by increasing interest rates and
limiting lending through increased banking reserve ratios.
We believe the same path would be followed in a
Eurobond default scenario. In 2016/17, we saw a
significant increase in non-performing loans and lack of
credit in the economy due to the higher interest rates and
reserve ratios, slowing the economy. Should we see a
default on the Eurobond, we may therefore see a drop in
GDP growth by up to 2%.
Conclusion
The view that the three stories collectively is a reasonable
approximation of reality is supported by what happened in
2015, Zambia’s annus horribilis. Despite (a) significant power
problems due to inadequate rain (95% of Zambia’s power
is from hydro), (b) the Kwacha sliding from 7 to 12 and
the market over-reacting, resulting in inflation and higher
interest rates, (c) copper prices nose-diving from
$3.20/pound to $2.00/pound, and (d) President Sata
dying, the economy still grew by 2.9%. So with (i) political
& news-cycle providing -1% GDP growth and (ii) copper
pricing - 2% GDP growth, the thesis would seem to be
broadly correct in this case.
“Non-agriculture productivity growing at
2.4% p.a., 6 x agriculture productivity”
(Source: World Bank, UARE)
5-year Copper Price ($/lb)
690
760 708 712
774
852
2012
2013
2014
2015
2016
2017
Zambian Copper Production (1,000 tonnes)
Source: Trading Economics
Source: ZCCM
7
|The Three Stories About Zambia

The Zambian economy has continued to register positive
growth, with a real GDP increase of 4.1% in 2017.
Forecast for real GDP growth for the next five years, are
around 4.5-5.0%. This is largely driven by manufacturing
and agriculture, in addition to mining, resulting from
increases in production and the global prices of resources.
GDP growth in Zambia is forecasted to grow consistently
faster than South Africa and the wider SSA region,
through to 2022. Demonstrating visible opportunity in the
Zambian market, compared to its counterparts.
Monetary Policy Stance
A tight monetary policy stance by the Bank of Zambia
(BoZ), which started in late 2015, led to a marked lowering
of inflation through the course of 2017. The 2017 year-end
position was 6.1%, representing a reduction from the 2016
year-end position of 7.5%.
4.0%
4.5%
4.5%
4.5%
4.5%
4.5%
1.5%
1.7%
1.8%
1.8%
1.8%
1.8%
1.0% 2.0% 3.0% 4.0% 5.0%
2018
2019
2020
2021
2022
2023
Zambia South Africa
Zambia’s Economic Performance
A significant currency depreciation through 2015, due to
the strengthening of the dollar, impacted considerably
upon the inflation rate in Zambia, which rose up to a high
of 22% in March 2016. This was primarily as a result of
the rise in the price of imported goods, coupled by the
falling copper prices and an energy crisis die to the lack of
rainfall. This had an impact upon consumer and business
activity, with reduced spending, as wages took time to
react, and businesses hit by currency depreciation. Despite
this, the economy still successfully grew at 3.8% in 2016.
Inflation was subsequently successfully contained within
the target range of 6.0-8.0% for most of 2017. BoZ eased
its monetary stance, in order to support economic growth
and financial system stability by reducing the BoZ Policy
Rate (BPR) to 10.25% in November 2017, down from
15.5% during 2016. In parallel to this, the BoZ also
reduced the statutory reserve ratio (SRR) to 8.0% in
November 2017, down from 18% in 2016.
Despite an escalation in fuel costs, the inflation forecast
for the 2-year period ahead remains within the target
range. As a result, in support of economic growth and
financial system stability, BoZ further lowered the BPR to
9.75% in February 2018, while the SRR was lowered to
5.0%. With an improving monetary policy position,
market liquidity has significantly improved, coupled with
an overall decline in the domestic interest rates.
Rate 2016 2017 Change
Inflation Rate 7.5% 6.1%
BoZ BPR 15.5% 10.25%
BoZ SRR 18.0% 8.0%
Treasury Bill Rate 25.5% 16.6%
Nominal Lending Rate 29.4% 24.6%
|Zambia’s Economic Performance
Source: Bank of Zambia
Source: Bank of Zambia, Morningstar
Zambian Inflation and Exchange Rate
v Zambia’s macroeconomic performance rallied over the last year
v Credit availability has improved over the last 2 years, coupled with a decline in domestic interest rates
v Questions over the sustainability of Government debt loom large and its possible impact on currency
Forecasted GDP Growth Rate – Zambia vs. RSA
Source: World Bank and IMF
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jun-13
D
ec-13
Jun-14
D
ec-14
Jun-15
D
ec-15
Jun-16
D
ec-16
Jun-17
D
ec-17
Jun-18
Total Inflation Exchange Rate (ZMW:USD)
8

The IMF, has projected that the value of Government
debt would rise to 44.3% of GDP by 2020-2022 and that
total external debt would rise to 76.6% of GDP by 2020,
significantly breaching the 40.0% threshold for sustainable
debt.
With Government in huge arrears on the servicing of
suppliers, particularly infrastructure players, for US$1.43
billion as at March 2018, questions over the sustainability
of Government and national debt loom large, with a
potential debt default, should the current accumulation of
debt continue to go unchecked.
A number of reforms, to address the fiscal and debt
challenges have been announced. These include:
addressing the sustainability of parastatal bodies, changes
to the fuel importation system, selective cancellation of
current contracted debt, which has not yet been
disbursed, and conducting liability management such as
extending maturities of some debt, to reduce the quantum
of debt repayments during the maturity period of the
Eurobonds. Consistent follow through of these and other
austerity measures will signal a shift and calm the markets.
Labour Force & Employment
The 2017 Labour Force Survey estimated the working age
population, that is persons 15 years and older, at 9.0
million, equal to 51% of the estimated total population.
Of the working age population, 3.1 million (34%) were in
employment, with about 0.76 million of those (25%)
holding a guaranteed social security. About 60% of the
employed population were concentrated in the urban
areas. About 0.59 million currently working for the central
or local Government, quasi-governmental or parastatal
institutions.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
2011
2012
2013
2014
2015
2016
2017
Interest Rates
Consolidation of gains from the monetary policy easing
has been challenged by the persistent demand for funding
by Government from the domestic market, in order to
finance the fiscal deficit. This has meant that yields on TBs
and bonds are higher than indicated by the BPR. As a
result, commercial banks and non-bank financial
institutions (NBFIs), especially pension funds, have
continued to buy Government securities, with commercial
banks holding 70.2% of TBs in issue, while NBFIs held
27.5% as at end-2017.
Total credit extended to Government and public
enterprises, accounted for 55% of total domestic credit;
this perpetuates the crowding out of the private sector
from accessing credit to finance economically viable
projects. Additionally, the attraction of risk free lending to
the Government at high yields has resulted in commercial
lending rates remaining escalated. The high local currency
borrowing costs has led corporates to access USD loans, at
much lower interest rates, leading to a 21% increase in
foreign currency denominated loans.
In search of attractive yields, non-resident investors have
increased their holdings of Government securities,
especially the longer dated instruments, signalling
confidence in the Zambian economy.
Debt Burden
Inconsistences in the management of the fiscus over the
last 3 years coupled with huge infrastructure financing
requirements has resulted in a sharp ramping up of
Government external debt as a percentage of Gross
Domestic Product (GDP) to an end-December 2017
position of 34.0% from 33.6% in 2016.
Source: Bank of Zambia, Oxford Economics
0%
5%
10%
15%
20%
25%
30%
2013
2014
2015
2016
2017
2018F
Central Bank Rate Commercial Bank Rate
Central Bank and Commercial Bank Lending Rate
Government External Debt as a Share of GDP (%)
Source: IMF
|Zambia’s Economic Performance
9

NEW CBD
WOODLANDS
LS-MFEZ
Kenneth
Kaunda
International
Airport
T2
T4
T2
T1
M9
OLD
CBD
HEAVY
INDUSTRIAL
LIGHT§
INDUSTRIAL
YORK
PARK
MAKENI
INDUSTRIAL
ROMA PARK
ROMA &
FOXDALE
LEOPARD’S
HILL ROAD
POLITICAL
HUB
LE -
MFEZ
KABULONGA
IBEX HILL
|Lusaka City Map
Key
Retail
Office
Industrial
Residential
10

Lusaka, the capital of Zambia, is one of the fastest growing
cities in southern Africa. It is centrally located and
strategically positioned at the intersection of four of
Zambia’s main highways:
• Great East Road (T4) to Malawi,
• Great North Road (T2) to Tanzania,
• Livingstone Road (T1) to the south
• Mumbwa Road (M9) to the west
These roads are also sections of major trade routes
crossing Africa and as such, Lusaka has the capacity to
become a regional transport hub. Lusaka is easily accessible
by road and air - housing the largest international, and
soon to be opened brand new airport, in Zambia. There is
an old rail network connecting Lusaka to the Copperbelt
and Livingstone, but there are several limitations associated
with it and this suggests that Lusaka will therefore remain
the largest transport hub in the country for transit vehicles.
Lusaka – A City Growing Strongly
Population
Lusaka has a population of 3.1 million (2017), which is
projected to grow to 5.1 million by 2030, at a forecasted
rate of 4.4%. The graph reflects Lusaka’s population
expansion from 2011 – 2020. It indicates that the city’s
population is growing rapidly at a rate close to 4.9%.
Over 42% of Zambia’s total population currently reside in
cities and by 2025, it is forecasted that the majority of
people will live in urban areas. Lusaka’s population density
is 7,416 people per km2, which makes it one of the more
densely populated cities in Southern Africa.
Social
Lusaka’s poverty gap ratio has reduced from 8.5% in 2006
to 7.1% in 2015, reflecting a gradual reduction in the
proportion of people living below the poverty line.
Particular progress was made from 2010 in combatting
poverty in Lusaka, with the incidence of poverty falling
marginally from 2005 to 2010, and then considerably from
24.4% in 2010 to 20.2% in 2015. Despite progress made in
poverty reduction across Zambia, a dichotomous trend has
emerged, in which 10% of the population earn 50% of the
income. The majority of that 10% is manifested in an
urban elite, who hold a significant amount of the wealth.
Indicator 2005 2010 2015
Poverty Gap Ratio 8.5% 8.2% 7.1%
Incidence of Poverty 24.7% 24.4% 20.2%
|Lusaka
Source: Zambia Open Data
Source: Central Statistics Office Zambia
Location Map - Lusaka
v Lusaka is one of the fastest growing cities in southern Africa, benefiting from a population growth of more
than 4.9% p.a. over the last decade
v It is strategically located at the intersection of four of Africa’s most important trade routes
v Significant infrastructure investment is planned to improve the mounting congestion issues faced in the city
2
2.2
2.4
2.6
2.8
3
3.2
3.4
3.6 2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Lusaka Population (millions)
T4
T2
Copperbelt: 300km
Chililabombwe (DRC Border): 430km
Chirundu (Zimbabwe Border):
140km
Mgabi (Malawi Border): 590kmMumbwa: 160km
Livingstone
(Zimbabwe
Border):
480km (T1)
T2
M9
Source: UARE
11

The World Bank also notes that Zambia is consistently in
the top ten countries in SSA for political stability.
Spatial Development Plan
Under the Comprehensive Urban Development Plan
(CUDP), the spatial development plan (SDP) for Lusaka
(see Appendix 1 for magnified map) lays out the key land
uses, to be attributed to different areas of the city by 2030.
These are designed to accommodate the anticipated
population growth and the key sectors that are expected to
drive employment. Of note, residential areas are to
increase to 15,600ha, which will be dominated by the
development of medium density housing.
The SDP, indicates that the city’s main commercial and
business nodes (in red) are to remain concentrated within
the city centre. The Urban Centre Plan highlights that
Lusaka’s CBD, will be improved through developing a
public transportation and pedestrianised system enhancing
the flows of people through the business hub.
Furthermore, residential use has been assigned to Lusaka
centre to create a mixed-use hub, which will greatly
support urban renewal of the old, underutilised CBD. The
new CBD in Lusaka has been earmarked as a commercial-
shopping tourist centre.
The average household size in Lusaka has dropped from
4.9 to 4.7, however this figure is still high compared to
other SSA cities; for instance Harare at 3.9 and Gaborone
at 3.1. This may reduce household abilities to prioritise
spending on education and healthcare, and may suppress
economic development. It is however anticipated, that as
Zambia progresses towards becoming an upper-middle
income country, the size of households will continue to
decrease.
The rapid growth of the city’s population, has led to a rise
in the size of unplanned settlements, housing almost 60%
of Lusaka’s population. A common feature for these
settlements is substandard infrastructure, insecure land
tenure and lack of social services. As a result of this, the
government, alongside bilateral and multilateral partners,
are investing in infrastructure to supply these settlements
with basic facilities i.e. water and sewerage.
Universal Health Care has been taken up by Zambia, with
the National Health Insurance Bill recently implemented
to ensure all citizens have equal access to health care. This
is designed to have positive implications for the strength
and productivity of the workforce.
Economic
Lusaka’s economy has grown considerably over the last
decade at a rate of 8-10%. Whilst GDP per capita has also
grown from $3,162 to $3,557, this has not been at the
same rate as the GDP growth, as a result of the rapid
population explosion.
With its economic growth and increased standing as one
of Southern Africa’s most important cities, the economy
has become increasingly diversified. Lusaka is the Zambian
headquarters for most local, regional and international
organisations, as well as the country’s Government. As
such, it has a growing service industry and an emerging
tech presence, driven by the high demand for mobile
connectivity across the country. It has a strong
manufacturing economy, which plays a significant role in
the production of goods, particularly food processing.
Political
The city of Lusaka is the administrative centre of Zambia
and as such is where most political activity takes place. The
city has maintained peace and political stability, with public
institutions continuing to mature. The Ibrahim Index of
African Governance ranks Zambia 7th for it’s level of
government performance and 13th for its quality of
institutions in Africa.
|Lusaka
Spatial Development Plan
Source: Lusaka City Council, JICA
12

Lusaka Real Estate Market Report |Lusaka
Urban Transportation Facility Development
Roads
A significant upgrade to Lusaka’s road network is to
address the mounting congestion problems:
• A total of 120.7km of road works will be carried out to
improve the existing network by 2021.
• Three layers of ring roads; inner, middle and outer are
proposed by 2030:
v Inner Ring Road (in existence) – designed to
decongest the inner city, it connects the LS-MFEZ
to Kafue Road.
v Middle Ring Road – surrounds the existing urban
sprawl areas, this will scatter traffic between the
CBD and residential areas.
v Outer Ring Road – new road designed to bypass
the city centre’s main traffic congestion and to
support the development of satellite towns. The
road will connect the Kafue Road to the new
Mumbwa Road, and stretch to Lusaka West, to join
the Great North Road.
Public Transport
In the short term, the bus network will continue to be
delivered by the private sector. Improvements are to be
made to the network, through upgrades to the roads,
construction of bus stops and designation of new bus
routes. Many road upgrades will include the designation of
exclusive buses lanes. The extension of the Kafue Road
and dedicated bus lanes will also open up the south of
Road network plan 2030
Lusaka to further residential development. Rail transit is
unlikely to be introduced to Lusaka before 2030, given the
associated significant costs and timescales.
Air Transport
Kenneth Kaunda International Airport is currently
undergoing an extensive upgrade and a new passenger
terminal is expected to open later next year. The airport
will comprise a 70-key modern hotel, new terminal
building with a capacity of 4 million passengers, a VIP
terminal building, increased cargo handling and a shopping
mall.
Implications for the Lusaka Property Market
1. Rising demand for all asset classes
Rapid population growth in Lusaka is driving the
expansion of the real estate market, and not only though
the rising demand for housing. Economic growth is also
bolstering the real estate market through requirements for
commercial office accommodation as companies grow, a
transition into formal retailing preferences as disposable
incomes rise and for industrial space though the expansion
of manufacturing and distribution activity. The result of
this has been rising demand for all asset types in Lusaka,
and a shift in the landscape of the city.
2. Lusaka’s liveability
Through economic growth, social improvement,
infrastructure investment and good city planning, Lusaka
is increasingly becoming an attractive destination to live.
For Zambians, but also expatriates, Lusaka is a city of
choice, it offers employment opportunities, good retail and
leisure amenity, numerous excellent schools and a strong
healthcare provision with highly qualified people. This will
therefore continue to draw more capital into the city and
bolster demand for real estate assets, as well as investment
into the development and purchase of property.
3. Opening up of new areas
Population and economic growth in Lusaka is being
supported by infrastructure investment, via the
implementation of the CUDP. It is expected to have a
significant impact on the real estate market in Lusaka. With
assigned urban land uses changing and the ways in which
people flow around the city being altered, new hubs will
emerge, whilst areas that are now impassable due to heavy
congestion may once again become hotspots for
commerce and growth. With improved connectivity links
in and around the city, productivity will be enhanced,
serving to attract further foreign investment into business
and real estate.
Source: Lusaka City Council
13

LUSAKA |
Real Estate Investment Market

$1.3bn
invested into
Zambian real
estate between
2014-17
Lusaka’s Real Estate Investment Market
UARE have logged almost $1.3bn in property investment
into Zambia between 2014-17, concentrated mainly in
Lusaka. The city is one of the more active and transparent
property markets in Africa and is ranked 3th in SA12 by
JLL in its 2018 Real Estate Transparency Index.
International real estate service providers are starting to
become active with Cushman Wakefield and Broll recently
entering the Zambian market, and JLL also initiating
coverage. Knight Frank and Pam Golding have had a
significant presence in Lusaka for many years. There are
also a number of good law firm and local professional
services companies in Lusaka.
International investors
As part of the positive growth cycle of the industry, a
number of international investors have entered the Lusaka
property market and these players have invested $716m in
Zambia over the last four years, of which 74.6% (or
$534m) was in Lusaka.
While South Africa accounts for 51% of the international
funds invested, we have also logged investments from 10
other countries, showing some diversity in the investor
base. We find it particularly interesting that more than 10%
of the capital has come from Zambia’s neighbours’
Botswana and Tanzania.
The international investors transacting in Zambia include
quality names such as Hyprop (SA), SA Corporate Real
Estate (SA), Grit (Mauritius), Novare (SA), Actis (UK),
PrimeTime (Botswana), Terrace Africa (SA) and Heriot
Properties (SA). ShopRite also has a significant wholly-
owned property portfolio in Zambia.
International investors currently looking at transactions in
Zambia include: RMB Westport, Eris / Momentum Fund
and GrowthPoint Investec Africa Fund. These
international investors are following a range of investment
strategies and retail is high on the agenda, being backed by
strong covenants and brands already well-known to the
investors and developers.
64% of the logged international investment has been into
retail property with hotels, offices and residential equating
to 13%, 11% and 10% of the invested funds, respectively,
2% has been invested in other asset classes.
64%
13%
11%
10%
2%
International Investment - Asset Type
64%
13%
11%
10%
2%
International Investment - Asset Type
Retail
Hotels
Offices
Residential
Other
|Lusaka’s Investment Market
$534m
of international
investment into
Lusaka’s property
market
64%
of international
investment into
retail assets
51%
13%
12%
6%
6%
5%
5%
2%1%
Investment Investment - Origin
South Africa
China
Mauritius
Botswana
Tanzania
Switzerland
Thailand
UK
Turkey
International Investment – Country of Origin
51%
13%
12%
6%
6%
5%
5%
2%1%
Source: UARE
International Investment - Development vs. Purchase
of Cash-Flow Generating Assets
44%
56%
44%
56%
Development
Purchase
v A number of international investors have entered the Lusaka property market over the last 4 years
v The local institutions should purchase real estate assets to inject further liquidity into the market
v Retail is the most active asset class due to good shopping centres, with strong tenants on USD leases
15

Of the $716m we have logged for international property
investment into Zambia (2014-17), this is relatively evenly
spread between the purchase of cash-flow generating
assets and the development of new assets (56% vs 44%),
pointing to different risk appetites and return
requirements for investors. We can expect that Lusaka
will still be the main entry point for international investors
and that as they become more comfortable with the
Zambian market, will venture into other parts of the
market.
From a pricing perspective, international investors have
been willing to pay more market-related prices for prime
assets than local investors, and have successfully secured a
number of these. Many of these investors also have access
to a lower cost funding than is available in the local
market (mostly due to relationships with the head offices
of international banks).
The cash-flow focused international investor generally
prefers deals over $20m of which there are only a limited
number and can handle deals as large as $150m. UARE
expect that they will continue to keep a focus on retail,
due to the backing by strong tenants, as well as some
office assets tenanted by international occupiers. We have
logged about $200m of dry powder allocated to Zambia
from the cash flow generating investors known to us and
in the range of $120m for developments from
international investors.
Chinese investors are quite active in the market in
residential and office and also, to a smaller extent, in
retail. The 16,000m2 SunShare office across from East
Park Mall and Arcades, has been a successful investment,
although some of the retail developments have been less
lucrative and seem to primarily be tenanted by Chinese
retailers of lower priced goods. There is limited
interaction between the Chinese players and the rest of
the property community whether from a funding, leasing
or tenant perspective but we expect that Chinese players
will eventually become more integrated in the market.
Local institutional investors
We have currently logged about $5.1bn of Assets Under
Management (AUM) for the local institutional investors
we cover. Based on conversations with these institutions,
we estimate that they have $825m of property AUM and
most of them are below their target allocations for
property, which are generally in the 25-30% range.
Consequently, we calculate that local institutions,
excluding NAPSA, have about $210m of investment
capacity for property, most of which they want to invest
in cash flow generating assets, yielding about 10.0%
currently. Some of the larger investors are also examining
proposals to invest in partnerships with local developers,
as it is recognised that property development is a
specialised business and one where – as the old saying
goes – “the best way to make a small fortune… is to start with a
large one.”
NAPSA, the public pension fund, is about 80% of the
AUM among local institutions and are clearly the
dominant player. NAPSA has limited involvement with
the rest of the industry and has never bought any cash
flow generating assets, concentrating on the development
of large assets (with mixed success) for its own balance
sheet. For instance, the $232m Levy Mall mixed-use
project, is generating a reported yield-on-cost of 2.0-3.0%.
The industry needs NAPSA to deploy a portion of its
monthly $80m inflows and significant cash resources into
property, its investment limits allowing, through buying
existing assets and freeing up capital for developers to re-
deploy into new developments, in turn, creating the jobs
and taxes that Zambia needs.
Radisson Blu and the SunShare Building
|Lusaka’s Investment Market
16

Yield Forecast
Super-
Prime
Yield
7.0 –
7.5%
Prime
Yield
9.0 –
9.5%
Secondary
Yield
10.0 –
11.0%
Of the $1.3bn of investments into Zambian property over the last four years. The vast majority of this is single-asset
deals – we have noted two portfolio sales. While international investors are primarily looking for assets valued at
more than $20m and preferably bigger than that, the local investors are happy to take assets up to $8m but prefer
assets in the $3-6m range. Consequently, assets between those sizes are stuck in what we call ‘the valley of death’ –
too big for the local investors, too small for the international investors. We see a possibility of aggregating these
assets into portfolios that would then (a) be able to trade, and (b) would see some yield compression.
Retail Transactions
Transaction Year Location Buyer Seller
Size
(m2
)
Price Yield Per m2
Twin Palms Mall 2017 Ibex Hill Novare Glendinnings 7,500 $10,500,000 9.50% $1,400
Centro Mall 2016 Kabulonga PrimeTime Pylos 7,500 $17,100,000 9.25% $2,280
East Park Mall (50%) 2015 New CBD SA Corporate Napoli Group 22,360 $72,250,000 8.50% $3,231*
Cosmopolitan Mall (50%) 2015 Makeni Grit Rockcastle 25,800 $74,200,000 7.50% $2,968*
Manda Hill 2014 New CBD Hyprop Africa Land 44,000 $141,000,000 8.10% $3,205
Office Transactions
Size
(m2)
Price Yield Per m2
MTN 2017 Roma MTN Mt. Meru 4,500 $9,000,000 - $2,000
Trinity 2017 New CBD ZCCM-IH
Local
developer
3,120 $8,000,000 - $2,564
PWC 2016 New CBD PrimeTime
Local
developer
4,000 $8,793,108 - $2,198
Acacia Park 2015 New CBD SA Corporate
Napoli
Property
12,700 $26,639,000 9.10% $2,098
Stanbic Head Office (49%) 2015
Addis Ababa
Drive
Stanbic Bank
Zambia Ltd
REIZ 5,568 $6,615,000 9.35% $2,425
Transactions
|Transactions
*based on 100% value
Retail has clearly been the most active asset class from an investment perspective and
has been dominated by international investors with all five transactions below completed
by international buyers. We are starting to see significant interest from Zambian
institutional investors in retail but, with exception to AfLife’s purchase of Kapiji Mall in
Solwezi, have not seen any major transactions yet. There is a significant amount of
development activity in retail and we expect that many of these assets will trade soon.
There are a number of retail assets in Lusaka that are stuck in the ‘valley of death’ and
have been on the market for quite a while without selling. UARE broadly expects retail
yields to remain stable, with super-prime yields possibly increasing slightly and prime
and secondary yields tightening.
Due to the significant over-renting of most properties (i.e. contracted rents being higher
than market), we have seen declining interest in office from investors and increasing
yields. The most recent transactions in the market have been corporate occupiers (e.g.,
MTN and ZCCM-IH) buying new headquarters to optimise use and cost. The market
has yet to see the first single-user, international tenant building come to the market and
we believe these types of assets will be priced much more keenly as the international
investors will see through to the credit quality of the tenant.
Yield Forecast
Super-
Prime
Yield
7.5%
Prime
Yield
9.5 –
10.0%
Secondary
Yield
11.0%+
17

Industrial Transactions
Size
(m2
)
Price Yield Per m2
Unilever Building 2018 Industrial Area - - - $1,400,000 - -
Hotel Transactions
Size
(beds)
Price
Price per
bed
InterContinental Hotel 2016
Haile Selassie
Avenue
Africa Hotel LP
Kingdom Hotel
Investments
244 $35,900,000 $147,131
|Transactions
Intercontinental Hotel, Lusaka
The industrial and logistics segment has not been active from a transaction perspective
as most developers have preferred to keep the assets on their own books. Estimated
yields are consequently less supported by transactional activity. There is interest in the
segment and we are aware of multiple Zambian institutional investors keen to acquire
industrial property and so we expect to see more transactional activity in this asset class.
We believe that modern logistics properties, let to good tenants, on long leases would
likely also be of interest to international acquirers.
The old hotel room valuation rule of thumb is that the value per room is the rack rate multiplied by 1,000. This broadly
holds true for the only observed transaction in the Lusaka property market which was the purchase of Intercontinental in
2016. HVS’s latest report in 2015 assessed the average value per bed at $120,000 which we believe is still broadly correct,
given reasonably unchanged rates and occupancies across the market but may trend down as significant new supply is
coming to the market.
Residential Transactions
No.
Units
Price Commentary
Southview Park 2017 Kafue Road REIZ
Southview
Properties Ltd
22 $5,200,000
High-end residential, potential for a
further 82 houses, offices and retail.
Large scale residential transactions have not been common in the Lusaka investment market. There has, however, been a
notable recent rise in interest in this asset class and we understand that there are a number of institutions active in the
sector at present.
Source: InterContinental Hotels
Yield Forecast
Super-
Prime
Yield
10.0%
Prime
Yield
11.0 –
12.0%
Secondary
Yield
13.0%+
18

Debt availability
Support from lenders – but at a cost
We understand that most of the large real estate lenders
have recently become quite positive on Zambia (driven by
their risk departments). Consequently, we are seeing a clear
interest from them in increasing their Lusaka property loan
books, after only participating in the most secure deals in
the period 2015-17.
The largest property lenders in Zambia are Stanbic (part of
the Standard Bank Group) and FNB Zambia, while
Barclays (soon to be renamed Absa) is showing a strong
interest in increasing exposure. IFC has also recently
become active in the market, having funded the Novare
Great North Mall, and is also looking at a few larger hotel
deals. Standard Chartered currently has no real property
exposure to the market but is looking to finance prime
assets in Lusaka, based on loan sizes of $15m+. AtlasMara
and Cavmont are also open to fund smaller transactions
between $1m and $3m.
While Investec have historically provided some loans to
the market, they have no major exposure currently that we
are aware of. We expect that Nedbank will be active in
Zambia in the short to medium term. In certain
transactions local institutional investors will also provide
debt funding to transactions – these are often where they
also have equity exposure.
The lenders clearly prefer cash flow generating properties
but are also, to some extent, able to provide loans to fund
developments, although these come with rather onerous
covenants and conditions precedents. Almost all large
transactions are in USD, at generally fixed rates of 8.0-
12.0%, based on asset, developer/owner and tenant
quality.
Tenors are normally 7 to 10 years, although some banks
prefer shorter tenors. The loans are generally fully
amortising over the life of the loan and the amortisation
profile is either based on (a) fixed % amortisation, or (b)
equal monthly payments.
There are a few loans in Kwacha, generally for smaller
assets, at interest rates of 20-25%, although the Bank of
Zambia is pushing the banks to do more local currency
lending. The banks generally underwrite the cash-flow
generating loans based on a Debt Service Cover Ratio
(DSCR) of 1.2x. As amortisations and interest rates are
fairly high, we rarely see Loan-to-Value (LTV) of higher
than 55% from commercial banks.
Consequently, banks are in a very secure position as they
have high margins (often 5.0%+) over their lending costs
and no refinancing risk, as the loans fully amortise. This
leads to an interesting dichotomy, where the banks make
30-35% ROE on their loan books taking almost no risk,
while the developers get 16-20% IRRs taking all the risk as
amortisation rates are lowered.
It should be noted that the banks take almost all the cash
from the rents, leaving little cash return for developers and
owners for the life of the loan. We expect that over time
this situation will normalise due to market pressure, as the
banks will price corporate risk more keenly and take some
refinancing risk.
The property industry has successfully pushed the currency
risk onto the tenants as all, except for a very few,
commercial leases are in USD. This is a result of the
historically much lower USD financing costs, where the
trade-off for the retailers have been much lower rents
(would have to be at least 70% higher if in ZMW) vs. taking
the currency risk. In the short to medium term we see no
change in this scenario but should Zambian property
funding interest rates fall to the 8.0-12.0% range, we expect
a slow switch to Kwacha rents.
Almost no commercial tenants push for Kwacha rents at
the moment, but if we see another market depreciation of
the currency as in 2015, we expect the tenants will again try
to push for it, but will be unsuccessful. The smarter
landlords in 2015 gave the tenants temporary rental rebates
to allow their pricing to catch up with the new exchange
rates as inflation fed through. The landlords/borrower and
lenders need to discuss a devaluation scenario and agree the
ability for the landlords to temporarily breach the lending
covenants.
|Debt availability
Novare Great North Mall
19

Retail
v Opportunity for further retail development of shopping centres and supermarkets
v Continued movement away from informal retailing towards the formal sector, improving consumer choice and
cheaper goods
v 95% of formalised retail GLA is currently located in eastern and southern Lusaka
Lusaka is one of the better established and more dynamic
retail markets in Southern Africa, as evidenced by
significant disposable income, a willingness to spend it and
many international retail brands.
As an example, Zambia is ShopRite’s 2nd largest and
Hungry Lion’s largest market outside South Africa. The
Manda Hill ShopRite has for many years been ShopRite’s
most profitable store, generating more profit than all the
ShopRite’s in the Free State, one of the nine provinces of
South Africa.
Many of the large anchors tenants such as ShopRite,
Game, Spar and Pick n Pay, have been active in Zambia
for more than 10 years, while newer entrants such as
Choppies, Food Lover’s Market and Jumbo, in addition to
the many store openings of the existing players, shows that
the market continues to be an attractive destination for
retailers.
The formal retail market is concentrated in shopping
centres, although parts of Cairo Road and the areas to the
west of it also function as a lower-end high street. It
should be noted that the informal trading areas are still
highly active and that many consumers in a shopping trip
will visit both formal retailers and the informal traders.
A key part of the retail growth in Lusaka over the last 10
years has been driven by a massive conversion from
informal to formal retail, and we expect this growth to
continue for many years.
Formal retail provides a superior shopping experience,
with improved food safety, often cheaper goods and a
better selection and quality. It is also aspirational to buy
from formal retailers. Through this process, tens of
thousands of formal retail jobs have been created.
Is there too much retail in Lusaka?
Let’s deal up front with this big misconception. The
answer: Unequivocally NO. While UARE do not foresee
room for more than one new super-regional/regional
(20,000-40,000m2) centre in the next 3-4 years, there may
be room for existing centres to successfully expand to
that size. What we do certainly see room for is, 3-5
neighbourhood centres of 10,000-15,000m2 and tens of
local convenience centres of 3,000-6,000m2.
The provision of formal retail space in Lusaka is still very
low at 0.1/m2 per person, compared with 0.5/m2 for
South Africa and Botswana (in the EU the number is
2m2). That Lusaka’s retail market is not over saturated is
further supported by the significant expansion plans of
numerous anchors tenants.
We do not see that e-commerce will have an impact on
the Lusaka retail market for the time being due to lack of
distribution facilities and market sophistication
Why is retail booming in Lusaka?
Since 2009 there has been strong and consistent growth in
the demand for retail from consumers driven by: strong
growth in the Lusaka’s population, high level of growth in
disposable income and conversion from informal to
formal retail. These factors, when combined with an
attractive investment climate pushed local and
international developers to create an explosion of malls
across Lusaka. The expansion expanding from a handful
10 years ago to more than 20 malls today. More precisely,
we have logged approximately 267,000m2 of shopping
centre space in 22 shopping centres, with four more
centres under construction and two existing ones under
expansion (these new openings alone account for another
52,000m2 Gross Lettable Area (GLA)).
|Retail
Rental
increase
accelerating
Rental
increase
decelerating
Rental
decrease
accelerating
Rental
decrease
decelerating
Anchors
Line Shops
267,000m2
Existing GLA
52,000m2
Pipeline GLA
1-4%
Prime Vacancy
5-10%
Secondary Vacancy
$12-18 / m2
/ month
Prime Anchor Rents
$7-11 / m2
/ month
Secondary Anchor Rents
$35-50 / m2
/ month
Prime Line Rents
$15-30 / m2
/ month
Prime Line Rents
21

Of the existing shopping centres’ GLA, supermarket
anchors account for just over 25%. UARE have logged 41
supermarkets in Lusaka, with an estimated GLA of
96,000m2 supplied by the biggest seven chains with
ShopRite and Pick n Pay both having 9 supermarkets and
Spar and Choppies with 7 and 6, respectively. About 70%
of the supermarket GLA is in shopping centres, with the
remaining space in freestanding stores or in small strip-
malls.
There are few secondary, non-food anchors in the market,
with only six building supply / DIY stores in Lusaka and
furniture stores severely restricting roll-out. There are also
only two cinemas in Lusaka, with Ster-Kinekor
successfully relocating to Manda Hill from Arcades, and
the other at Levy Mall – Fresh View Cinema.
The table below provides an interesting insight into the
opportunity for supermarket expansion in Zambia,
indicating that for every supermarket, there are over
200,000 people. When this is compared to Botswana,
where there are 11,250 people per supermarket or South
Africa - 9,150, it demonstrates the positive demographic
dynamics in place in Zambia for at least 155 further
supermarket openings in Lusaka alone. If we consider
that Lusaka’s population is larger than Botswana’s and has
only 45 supermarkets. This is further supported by the
higher GDP per supermarket in Zambia at $322m,
compared with Botswana and South Africa, $80m and
$58m, respectively.
Locations
The retailers and developers have very clearly followed
wealth over the last 5-7 years, in their choice of new
openings in Lusaka and moved away from a more initial
focus on mass and velocity (e.g. the Cairo Road area).
Consequently, 95% of formalised retail GLA is located in
eastern and southern Lusaka.
Western and northern Lusaka arguably has a higher
population (but with lower purchasing power), we think
that this creates opportunity for development, particularly,
multiple 4,000-8,000m2 convenience malls.
We have logged 31 different compounds in Lusaka, of
which, only three are served by a supermarket inside, or
just next to the compound, with a few others in close
proximity. We note, though, that most of the retail
developments planned for Lusaka are still to the city’s east
and south. We also see an opportunity for retail warehouse
developments in easily accessible locations along main
roads, on the outskirts of Lusaka, where lower land costs
and efficient construction allows developers to build larger
stores of 300-1,000m2 at rents of $8.00–10.00 per m2.
Overview of Retail Sub-Markets
1. Great East Road – Manda Hill to East Park (new CBD)
The short pitch of Great East Road from Addis Ababa to
Thabo Mbeki is clearly the prime area for retail in Lusaka
and at 97,000m2, comprises almost 40% of the city’s total
shopping centre space. The pitch is anchored by two of
Southern Africa’s best shopping centres outside South
Africa, the 44,000m2 Manda Hill and the 34,000m2
EastPark, as well as the recently expanded Arcades Mall.
EastPark also is currently undergoing an extension, which
will increase its commercial and retail GLA by a further
30,000m2. in multiple phases. We understand that ShopRite
will be the anchor tenant for the first extension.
2. Kabulonga and Woodlands
This area comprises 18,500m2 of shopping centre
accommodation, with a further 16,000m2 under
construction at Novare’s Pinnacle Mall and Napoli
Group’s Woodlands Stadium Mall. Kabulonga and
Woodlands are two of Lusaka’s key residential nodes,
particularly in the high-mid end sector. Formal retail in
these locations therefore, has a strong catchment, which
extends further down to Leopards Hill and Sunningdale.
“About 70% of the supermarket GLA is
within shopping centres, with the
remaining space in freestanding stores or
small strip-malls.”
|Retail
Country
No.
supermarkets
Population
(m)
People /
supermarket
GDP ($m) /
supermarket
Botswana 200 2.3 11,250 80
South Africa 6,000 54.9 9,150 58
Zambia 85 17.1 201,176 322
Source: UARE
EastPark Mall
Source: Lusaka Star
22

Rentals & vacancy
Rents average $22.00 – 25.00 per m2 in the prime
shopping centres such as Cosmopolitan, Centro and
EastPark. Manda Hill as the best asset in the market,
achieves rents over $32.00 per m2.
Good convenience centres achieve average rents in the
$15.00-$18.00 per m2 while older, more poorly designed
or maintained assets average rents closer to $10.00-$12.00
per m2 .
Anchor tenant rents differ dramatically whether the
developer provides a grey-box (“Shell & Core”) or
handles the installation of the fitout. For instance, the
standard ShopRite grey-box rent is $10.00 per m2 , while
the fitout included rent is $15.00 per m2 (it should be
noted that ShopRite has the most expensive fitout in the
market).
In the super-prime shopping centres there is normally
almost no vacancy and a long waiting list of interested
tenants. On the other hand, in older, smaller, more run-
down centres, we have seen vacancies as high as 50%,
requiring a major investment program and repositioning
by the owner to fill this again.
3. Makeni / Kafue Road
Makeni and the Kafue Road have a very strong formal
retail presence including Makeni Mall (12,000m2),
Cosmopolitan Mall (25,800m2) and Embassy Mall
(9,000m2) all situated within 150 m of each other, on either
side of the T2. Further to this there are also a number of
Chinese malls along the Kafue Road, such as Fly Huang
and China Mall. A number of successful retail warehouses
are situated in the area, tenanted by the likes of Jumbo,
Builders Warehouse and Orca.
4. Cairo Road
The Cairo Road area is a lower-end retailing destination
with a larger presence of local retailers in shopping malls
such as: Southgate Shopping Centre, Downtown Shopping
Complex, Cairo Mall and Society Business Park. Levy Mall,
is NAPSAs 27,000m2 retail scheme, situated behind Cairo
Road. Carousel Shopping Centre is also located in
proximity, further down the Kafue Road.
In addition to the above, there are a large number of
individual retail shops in the area, as well as many informal
retailers, creating a lower-end high street along Cairo Road
and surrounding areas.
5. Roma
Roma is dramatically under-supplied with formal retailing,
with exception to the offering at Foxdale Court (2,600m2).
This may be as a result of the current catchment being
served by the extensive options close to the Great East
Road node.
6. Airport Junction / Ibex Hill
The airport junction, in close proximity to Kenneth
Kaunda International Airport, has in the last few years
become a formal retail hub, with the opening of Waterfalls
Mall (7,000m2) and Garden City Mall (8,000m2). Upon the
opening of the Airport’s new terminal, a further shopping
mall is to be developed there.
Twin Palms Mall (7,500m2) in Ibex Hill is anchored by a
Shoprite.
Other areas
Further to the above there are a number of other retail
malls scattered across Lusaka, including Novare Great
North, PHI Mall, Matero Mall, Spar Mall (Mumbwa Road),
and Tafika in Kanyama. In Long Acres, the Public Service
Pensions Fund (PSPF) is developing the Long Acres Mall,
which will deliver a further 14,000m2 and is due to open in
April 2019.
|Retail
Lusaka’s main retailing locations
Source: UARE
NEW CBD
Kenneth
Kaunda
Internati
onal
Airport
T2
M9
MAKENI
ROMA &
FOXDALE
CAIRO
ROAD
T4
T2
AIRPORT
JUNCTION
WOODLANDS
KABULONGA
1
2
4
3
5
6
23

In line shops, fashion retailers are under pressure. Along
with slowing discretionary incomes in 2016/17, the line
shop rental has been falling and as a result there has been
a significant decreases in the opening of new stores.
In early 2018, this trend seems to have reversed slightly,
with line shops now selectively looking at opening new
stores. In response, rentals seem to have firmed up,
although not to the extent that they are increasing.
Tenants & Tenancy Demand
There is still significant anchor tenant interest in Lusaka,
looking to expand – including Game, ShopRite, Jumbo,
Pick n Pay, Spar, Choppies and Food Lovers Market for
the supermarkets, and Builders Warehouse, CNBM and
BuildIt for building supply and DIY chains.
For instance, ShopRite is in the process of opening
another five stores in new or expanded Lusaka shopping
centres and UARE understand they are making
commitments to other locations in Lusaka as well. Spar
and Choppies are also opening new stores at some speed,
and another 2-3 Game stores may also open over the
coming 18-24 months.
|Retail
The convenience line shop tenants are doing well and
there are normally multiple branded local and
international retailers for convenience slots such as F&B,
pharmacies, phone shops, and banks, among others.
The fashion retailers with customers driven more by
discretionary spending are more cautious. PEP which has
more than 50 stores in Zambia, has recently reorganised
their store footprints and closed in certain locations,
although they are still in an overall expansion mode. Jet
and Ackermans are also still growing in the lower-medium
income segment and Woolworths, at the more high-end
segment, is taking locations selectively.
ZamBeef with more than 160 outlets in Zambia are
focusing on standalone, company-owned properties while
Bata with more than 150 outlets also are active.
Consequently, line shop demand is more moderate than
anchor tenant demand but is expected to continue to
grow alongside disposable incomes in Zambia
With the slowing growth in discretionary incomes for the
ordinary consumer in 2015-16, many lower-end Zambian
consumers traded down, which helped the growth of the
Chinese run businesses. While most of those are not
branded, Home Essentials have put together a strong
offering and brand, the retailer can now be seen in many
good shopping centres.
Retailers’ Footprint in Lusaka
0
5
10
15
20
25
Shoprite
Pick
n
Pay
Spar
Choppies
Food
Lover'sG
am
e
W
oolworthsJum
bo
Builder's
W
arehouseM
icM
arBuildIt
H
om
eEssentialsE
dconPepkorFoshini
M
R
P
T
ruworths
M
ud
Bata
H
ungry
Lion
Steers
D
ebonairs
Fishaway
O
ceanbasket
KFCG
alito's
KegN
andos
M
ugg
&
Bean
G
igibonta
D
eli
Source: UARE
24

Office
v New office nodes are appearing across the city, challenging the transitional CBD locations, as crippling
congestion problems continues to hamper the establishment of a central hub for business in Lusaka
v The oversupply of stock to the market has resulted in reduced performance, with rents continuing to tighten
Lusaka’s office market continues to experience rising
demand, as it becomes recognised as a business hub in
southern Africa. Despite this, the market has experienced
mixed performance due to the significant amount of
supply that has come on to the market since 2015. The
performance of the commercial office market is very
strongly linked to that of Zambia’s economy and
commodity prices, further contributing to the fluctuating
performance of the office market.
Key Nodes
New CBD
Within Lusaka’s office market, the most noticeable and
well documented trend has been the general move of the
main office hub away from the old CBD, into more
peripheral locations. Lusaka’s main business hub is now
situated around Acacia Park, Mass Media and Thabo
Mbeki Road, with numerous international corporates
located here. As this area has become increasingly
established as a centre for business however, congestion
has once again started to mount and the same issues faced
previously by the CBD, are now appearing here. As a
result, other dominant nodes have become established,
slowly challenging this location as a business hub.
Our expectation is that, going forward, this commercial
office node will continue to expand along the Great East
Road towards the airport.
Old CBD
Like many cities cross Africa, there has been a significant
movement away from the traditional CBD in Lusaka, with
the majority of the stock now vacant. The main reason for
this shift has been the high levels of congestion that have
built up in the city centre. Further to this, the stock that is
available in the CBD is for the most part outdated and
does not meet modern, international Grade A or B
standards, which has resulted in many tenants turning
elsewhere for their office accommodation.
In order to address the mounting congestion problems
that are currently occurring across many of Lusaka’s
business hubs, the Zambian Government has announced
plan to improve the road network in and around the city.
With construction of a bypass and upgrades to the Kafue
Road, it is anticipated that the volume of traffic flowing
through the old CBD will begin to fall. This is expected to
have a positive impact on the demand for office stock,
although substantial refurbishment will be required to the
majority of the stock, and many floorplates are not optimal
for modern, open plan offices.
An example of where this has been successful is the
upgrade of Society House by NAPSA, which comprises
6,000m2 of refurbished offices, a Hilton hotel, retail shops,
and a 800 space multi-deck car park. Significant
developments such as this, will be central to revitalizing
the CBD in Lusaka. Tenants increasingly require a strong
amenity provision in proximity to their office space.
UARE anticipates that residential use will also increase in
the old CBD, through conversions of existing buildings, as
has been seen in Nairobi and Johannesburg.
|Office
Rental
increase
accelerating
Rental
increase
decelerating
Rental
decrease
accelerating
Rental
decrease
decelerating
Selection of New CBD Key Occupiers
• PWC
• AON
• Prudential
• Cavmont Bank
• Stanbic
• Barclays
• Citibank
• Pangea
• Ecobank
• BDO
• Corpus
• EY
• Deloitte
• FNB
Secondary Office Rents
Prime
Office
Rents
150,000m2
Existing GLA
Class A / B
35,000m2
Pipeline GLA
Class A / B
20%
Prime Vacancy
$16-19 / m2 / month
Prime Rents
$10-12 / m2
/ month
Secondary Rents
The CBD is also expanding to incorporate new nodes, for
instance Rhodes Park, which is home to the new Gallery
Office Park, Arcades and the 16,000m2 SunShare Building,
located behind the Radisson Blu.
25

Roma & Foxdale
Another key office node that is emerging in Lusaka, is the
Roma and Foxdale area, in the past couple of years
numerous large office developments have sprung out of
the ground here, predominantly at Roma Park. Foxdale
Office Park was the first significant commercial office
offering in the area, which opened in 2013, it comprises
1,300m2 of office accommodation.
MTN recently took 4,500m2 at Roma Park for their
Zambian Headquarters, buying the building last year for c.
$9million. Madison Capital have developed a 3,100m2
office here, but it remains vacant. In addition, China Civil
Engineering Construction Corporation have also located
their 3,500m2 regional Headquarters at the Park. Roma
Park benefits from fibreoptic connectivity and good access
to water and electricity, factors that are now considered to
be fundamental for office accommodation in Lusaka.
Mount Meru is currently in the process of constructing an
additional office next to the MTN building, they also have
recently moved into another office further up the Zambezi
Road. It is anticipated that with the upgrade of the
Zambezi Road to four lanes, this area will continue to
grow as a significant office hub, through tackling the
mounting congestion issues in this area and connecting it
to the Great North Road as well as the Airport road.
Kabulonga
Another significant office hub in Lusaka is Kabulonga, the
main office stock in this area is concentrated at DG Office
Park, with tenants such as SES, BASF, Unity Finance and
LCSW. Kabulonga is also home to many NGOs, who tend
to take office accommodation in, what were previously
homes in the area. Developers are looking at constructing
additional Grade A office accommodation to this area.
Political Hub
Lusaka is Zambia’s political centre, and as a result, the
offices for most miniseries and government departments
are located within the political hub. Furthermore,
numerous embassies are also scattered around this area,
choosing to locate close to the main political activity.
Stock
UARE estimate that there is close to 150,000m2 of Grade
A / B office stock in the market, with around 60,000m2 of
that stock having being delivered to the market over the
last couple of years. It is though that of the total Grade A /
B stock in Lusaka, 30,000m2 of it is currently empty,
indicating that the vacancy rate is close to 20% in Lusaka.
This highlights the significant oversupply that is currently
being experienced within Lusaka's office market.
In addition to this, there is also significant amounts of
Grade C stock on the market that is unsuitable for
occupation and is in a poor state of disrepair. For instance,
much of the stock in the old CBD, has not be refurbished
since the 1970s.
|Office
Gallery Office Park, Rhodes Park
Source: Rhodes Park Development Ltd
Lusaka’s main commercial office locations
Source: UARE
NEW CBD
Kenneth
Kaunda
International
Airport
OLD
CBD
ROMA
PARK
ROMA &
FOXDALE
LEO
PAR
D’S
HIL
L
RO
AD
POLITICAL HUB
M9
T4
KABULONGA
T2
T2
26

up to 500m2 of space would be popular. A new serviced
desk product that has been launched at the Works by the
Latitude 15 hotel in Kabulonga, is growing in popularity,
although the high pricing and small target audience,
resulted in a slow initial absorption of the space.
Parking
In addition to floorplates, another important factor for
tenants locating in Lusaka is parking provision. The
majority of offices in Lusaka lack sufficient parking, with
an average of 1.5 spaces per 100m2 of accommodation.
Instead, developers should be aiming for at least 4 spaces
per 100m2, to accommodate staff and clients, but with the
lack of any town planning in place, building offices with
sufficient parking is difficult.
Rents
The oversupply of office stock in Lusaka, has had a
significant impact on the rental levels. Until a few years
ago, $25.00 per m2 was the achievable market rent for
higher end offices, partly due to the limited office space in
Lusaka and low traffic congestion. Now, at the lower end
of office stock in Lusaka, a tenant would be looking at
paying $12.00 per m2 and for good space, tenants can now
expect to pay $15.00-18.00 per m2 . Prime rents of $19.00-
20.00 per m2 can still be achieved for prime
accommodation. An example of where such rents are
being achieved, is at the Gallery Office Park, in Rhodes
Park. The units here range from 200 to 1,750m2 in size,
with a total of 3,500m2 of GLA still available.
A new sub-node of modern offices is forming around the
south-western part of new CBD, with top quality office
space quoting $22.00 per m2 but so far, the only real
interest has been from Standard Chartered, which sits
around the $18.00 per m2 mark.
Future Supply
Despite the office market suffering from an oversupply
issue, development continues to take place. These are a
few pipeline office projects that we are aware of in Lusaka:
• One of the larger projects is on Alick Nkhata Road in
Mass Media, with a GLA of 9,400m2 it will comprise 8
floors of approximately 1,100m2 and a 9th floor of
600m2. The completion is estimated for Q2 2019.
• At Long Acres Mall, a further 5,000m2 office block will
also be delivered alongside the shopping centre, hotel
and entertainment area.
• Two new office developments in the Manda Hill area
are planned behind the Showgrounds, this will extend
to 10,000m2 of accommodation.
• There is a new building planned for the Roma Park of
4,000m2, which Mt. Meru is currently constructing. A
third office block is also planned for the plot behind.
• 4,000m2 of office accommodation at the Standard
Chartered Bank development, due to complete in 2020.
Occupier Preferences
Floorplates
Tech companies, as well as the Embassies, will as a rule
take up to 1,000m2 floorplates in Lusaka, although there
are exceptions to this, for instance, MTN has recently
moved into their 4,500m2 of offices in Roma Park. Micro-
offices with 50–100m2 are also still in high demand, these
are particularly appealing to small-medium sized
enterprises such as start-ups and sole traders. Local
companies demand between 250–400m2 of office
accommodation, therefore a flexible workspace offering of
$20.00
$23.00
$25.00
$22.00
$20.00
$18.00
$-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2013
2014
2015
2016
2017
2018
Prime Office Rents (USD / m2 / month)
|Office
Source: UARE, Knight Frank, JLL
Airtel Office, New CBD
27

Industrial
v Lusaka’s industrial market has been one of the strongest performing asset classes in recent years however,
significant supply of grade B stock has recently been delivered to the market
v New nodes are starting to become established outside of Lusaka’s traditional industrial areas, most notably in
and around Makeni/Lilayi and to a lesser extent, Leopards Hill Road and Lusaka South MFEZ
As an asset class, the industrial market has historically
been one of the most stable in Lusaka. There has however
been an oversupply of Grade B stock, particularly around
Makeni, which has resulted in downward pressures on
prime and secondary rents.
Zambia’s strong agricultural and mining industries have
ensured consistent demand for industrial accommodation
in Lusaka, for storage, manufacturing and distribution
purposes. This has been further compounded by Lusaka’s
growing population and its rising disposable income,
resulting in a strengthening retail market, which requires
industrial units to allow for wider distribution across the
city and further into the country.
The existing location of the main industrial stock, to the
north-west of central Lusaka, along Mungwi and Lumbwa
Roads is very congested and much of it is not appropriate
for modern logistical requirements. As a result, new
industrial hubs have started to emerge in Lusaka, along
some of the city’s main trade routes and further out of
town, where there is more room for larger units and yards.
Lusaka’s location at the intersection of the North-South
and East-West road corridors and at the centre of
Southern Africa’s main arterial routes, in addition to its
expanding international airport, renders the city a prime
location for an international logistics hub.
What is the future for the Lusaka Industrial Market?
Planned road developments in Lusaka need to be
prioritised, to encourage the shift away from the low
quality industrial areas, into new economic zones being
promoted in the rural – urban fringe. These new locations
are better suited to cater for the rapid economic and
population growth experienced in Lusaka.
Discussions are currently ongoing regarding the
improvement of the Tanzania Zambia Railway’s bi-
national railway line. This spans from Kapiri Mposhi in
Zambia to the seaport at Dar Es Salaam, Tanzania. It is
thought the refurbishment of the line could be another
catalysing factor for long-term growth of the industrial
market in the country; especially for logistics companies.
Although to have a positive impact upon Lusaka’s
industrial market, a new line will be required to connect
the north-south rail road.
From local businesses to larger logistics and
manufacturing companies, the majority of demand going
forward will be for modern units that can facilitate the
efficient use of accommodation so that business can
competitively and efficiently operate in Zambia. These
industrial units must be very well located, with optimised
access points to allow for the rapid movement of goods to
and from the area. We know of a wholesale business
searching for 30,000 m2 of distribution accommodation in
the market.
|Industrial
East - West
North - South
North-South East-West Corridors
Copperbelt
Beira
Walvis Bay
Rental
increase
accelerating
Rental
increase
decelerating
Rental
decrease
accelerating
Rental
decrease
decelerating Secondary
Prime
Source: UARE
$6 / m2 / month
Prime Industrial Rents
$3 / m2 / month
Secondary Industrial Rents
28

Kenneth
Kaunda
International
Airport
LEO
PAR
D’S
HIL
L
RO
AD
KABULON
GA
Industrial Area
Much of the existing industrial stock remains concentrated
in the industrial zones, crammed in to the west of Lusaka’s
central business district and as a result suffers from major
congestion issues.
The industrial area grew in this area traditionally due to the
good connectivity to the Cairo Road and railway line as
well as the area’s strong power supply. As a result
manufacturing businesses still elect to locate here, with
much of the accommodation suitable for light industrial
usage. Businesses located in Lusaka’s current industrial
areas include Yalelo, Zambeef, Zambian Breweries,
National Tobacco Co, Total, Caterpillar and Pepsi.
York Industrial Park
York Industrial Park, located 6km south of Lusaka’s CBD
is leading the way for modern warehousing and logistics
development in the country, developed by Actis and
Improvon, York is the first AAA rated industrial park in
Lusaka, with a total planned bulk of 220,000m2 under roof.
Units at the park can be sold or are available for lease, with
the majority being built speculatively due to the lack of
appetite for pre-lets. Fast Moving Consumer Goods
companies, logistics, light manufacturing and assembly
firms are York’s main target occupiers and they have
started to receive momentum in demand due the lack of
these types of high spec units.
This superior efficiency and lower total distribution costs
are the developer’s key selling points, which is why York
can validate the higher rents. The design of York Industrial
Park, with particularly wide roads and large turning yards,
offers easier truck movement, thus more efficient delivery
and loading of goods.
So far 21,000m2 of warehousing accommodation has been
delivered at York. One of the first buildings to complete
was a 5,000m2 unit, which is split and leased to two
tenants, Global Roofing Solutions and Bakers Transport
Logistics. Over the coming year, a further 16,500m2 of
accommodation is in the pipeline, including one
warehouse of 6,500m2 being speculatively built. Phase 2
will also consist of about 10,000m2 of smaller units,
ranging in size from 400-1,000m2, these have already
received very strong level of interest.
Roma Park
The Roma Park development is more of a light industrial
hub to the north of Lusaka. When the new road plans for
the Zambezi Road are completed, this is likely to become a
very successful distribution centre.
LS-MFEZ
HEAVY
INDUSTRIAL
YOR
K
PAR
K
MAKENI
INDUSTRIAL
LE -
MFEZ
YORK
PARK
LIGHT
INDUSTRIAL
LE –
MFEZ
As a “land-linked” country, Zambia has strong transport
links by air and road to the sub-continent’s largest
economies. Zambia is also a member of two main trade
blocs, which provides significant opportunity for the
industrial market in Lusaka.
Whilst e-commerce will have a growing part to play in
Lusaka’s industrial markets, technological development and
infrastructure investment needs to improve considerably
before the city can cater to the distribution requirements of
online retailers. Furthermore, population mindsets
regarding shopping habits, will also need to shift before the
ecommerce market becomes large enough to drive
distribution requirements.
Key nodes
There are a number of nodes appearing in Lusaka, creating
attractive stock for investment, these include:
• Industrial Area
• York Commercial Park
• Roma Park
• Lusaka East MFEZ
• Lusaka South MFEZ
|Industrial
ROMA
PARK
Lusaka’s main industrial locations
Source: UARE
T2
M9
T4
T2
29

Quite a bit of space has already been sold, including to
Madison AM, who have developed 2,200 m2 of A-grade
multi-user warehousing. Link Pharmacies and UNIK are
both industrial occupiers at Roma Park, with Link
Pharmacy having built a distribution centre. Out of the 42
available commercial plots to lease and buy at Roma Park,
23 remain, demarcated for light industrial, retail and
commercial business use.
LS-MFEZ
Lusaka’s two Multi Facility Economic Zones (MFEZ) are
examples of where the government promotes economic,
social and environmental sustainability by migrating
industrial activities to rural-urban fringe areas. Despite the
incentive structures and low land cost in the zones,
businesses have been slow to adopt this decentralisation
process, preferring so far to stay in the traditional
industrial areas.
The largest MFEZ is Lusaka South, with 6,800,000m2
reserved for industrial development. It is 14km from
Lusaka City Centre and 21km from Kenneth Kaunda
International Airport. This Economic Zone aims to attract
both local and foreign investment, through the grant
incentives offered by the ZDA. These include, 0% import
duty on capital equipment and machinery, as well as
accelerated depreciation on those assets. There is the
added non-fiscal benefits of all the required services being
provided such as electricity, roads, water, internet and
sewage. Land costs are also very affordable at LS-MFEZ.
There are already 7 companies on the ground at LS-
MFEZ, including British American Tobacco and Zambian
Breweries, with a further 30 manufacturing firms agreeing
to take up space there. Eventually, this area will encourage
manufacturing and stimulate export grow, and establish it
as a manufacturing hub for the region.
LE-MFEZ
Lusaka East MFEZ is located in proximity to the airport
and extends over 5.7km2.There are 14 enterprises already
registered to operate from the industrial hub. It is a
Chinese overseas economics and trade cooperation zone –
the first in Africa.
Retail Warehousing
Retail warehousing is predominantly confined to the
Makeni area of Lusaka, however Leopard’s Hill Business
Park, which comprises 8,000m2 of stock, has been
particularly successful, with 100% occupancy, at rents of
$3.00-6.00 per m2.
UARE anticipates that there is a strong market for this
type of asset class in Lusaka, as an undersupplied market.
Rents
Rents for industrial accommodation in Lusaka vary
considerably with location. For instance, rents in the city’s
traditional industrial area average $3.00 per m2. At York
Industrial Park, rents for the small units start at $5.50 per
m2.The prime rents for industrial areas in Lusaka are $6.00
per m2, which is only really being achieved on Leopards
Hill Road, however the larger units at York Industrial Park
are also quoting $6.00 per m2.
The higher rent at AAA parks such as York are more in
line with the South African offering and targets firms who
will significantly benefit from the superior operating
systems and modern stock. Roma Park is also marketing
itself at the higher end of the industrial market. They look
to achieve the similar rents as York Park, targeting pricing
of $5.50-$6.00 per m2. This pricing is justified by the
location and quality of the park, however, to date, all of
the industrial tenants here are owner occupiers.
|Industrial
$3.00
$5.50
$6.00
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Secondary Prime Super-Prime
Industrial Rents
Source: Improvon, Rendeavour
York Industrial Park
Source: Improvon
30

3. A small, high cost mortgage market – Zambia has
mortgage penetration of less than 2% of GDP with little
or no mortgage expansion in the past few years.
Persistent high rates in excess of 20% will continue to
hinder mortgage take-up. From an end user perspective,
the estimated 45-50% of household income (well above
the world norms) spent on housing, remains a huge
challenge.
Residential
v The top end of the housing market remains under pressure due to oversupply
v The rental market is estimated to be 80 percent of the total housing market in Lusaka
v The absence of institutional capital for the housing sector will continue to drive growth in the self build market
|Residential
Zambia, in keeping with many other African countries, is
characterized by low median incomes and faces an
enormous housing supply challenge. Despite progressive
legislation, the housing sector is unable to meet the gap in
supply of quality housing, which is estimated by the
Government to be close to 2 million units. A large part of
this backlog is found in Lusaka, where the population is
growing faster than 4.8% p.a..
The response from the Zambian market, has been
typically resourceful. A largely informal, self-build market
has spun out of the opportunities provided by the large
expanses of vacant land surrounding the main cities. This
land has in turn, been sub-divided and offered to
purchasers on a plot and plan basis. The supply of
masterplanned larger estates and suburbs has been the
isolated exception, rather than the rule.
Despite the rapid rise in the self-build market, the housing
market in Zambia offers large scale opportunities, if costs
can be lowered, scale can be harnessed and an alternative
asset class of residential rental units can be nurtured by
local institutions.
Market Snapshot
Plot and Plan
It is difficult to imagine how Lusaka will rise above the
challenges presented in delivering mass affordable and
middle income housing for as long as there is an almost
exclusive focus on “for sale units”.
From a developer perspective three large obstacles hinder
growth:
1. Higher than necessary construction costs
2. Low incomes
Rental
increase
accelerating
Rental
increase
decelerating
Rental
decrease
accelerating
Rental
decrease
decelerating
Retail Banks - Mortgage Interest Rates (March 2018)
34.5% 33.0%
29.0%
24.3% 23.3%
21.0% 20.3%
17.9%
14.8%
0%
10%
20%
30%
40%
C
avm
ontBank
Indo-Z
am
bia
B
anK
FirstAlliance
B
ankStanbic
B
ank
Z
N
BS
B
arclays
B
ank
Z
am
bia
Standard
C
hartered
FirstN
ationalB
ank
U
nited
B
ank
for
Africa
Source: Bank of Zambia
The self-build market in Lusaka is a response to the high
cost regime of the “for sale” market, as well as to the
largely inaccessible and unaffordable mortgage market.
According to research conducted by CAHF, less than
2.0% of Lusaka’s citizens can afford to purchase (via a
mortgage) the lowest cost house on offer from a
developer. As a result, plot and plan has been a very
successful model for residential development in Lusaka.
Plots are prepared for development with access to water,
electricity and sewerage, enabling investors to start the
construction process as soon as the plot comes into their
possession. This model allows owners to gradually build
their homes over time, as and when they can afford to.
Low-end
Mid-end
$1,000-3,000 / month
High-end Residential Rents
$500-1,000 / month
Mid-end Residential Rents
$250-300 / month
Low-end Residential Rents
High-end
31

Lusaka Real Estate Market Report |Residential
Numerous schemes across Lusaka such as Roma Park,
Nkwashi, Lilayi and Meanwood illustrate the opportunity
having constructed over 30,000 plots.
On a like-for-like basis, the cost of ownership can be
double that of renting, pushing ever increasing numbers
into the self-build market. Almost the entire housing
market is a local currency play suggesting that, at least at
inception, the lead to drive affordability, quality and
volume will need to be taken by local institutions,
possibly with assistance from international development
finance investment.
Housing
The pressure facing the top end of the residential rental
market has been well documented. The relatively large
increase in supply of units at this end of the the market in
recent years has translated into lower yields and placed
downward pressure on selling prices. Traditionally, the
top end of the rental market (US$1000 p.m. and above)
was principally priced in US dollars, this has recently
started to change with many top end units now also being
quoted in local currency. Whilst much is written about the
top end of the housing market, it could be smaller than
1.0% of the total Lusaka housing market.
A relatively large increase in supply over the past decade
and the fear of another currency devaluation would
appear to living large in the minds of would be tenants
not earning a salary in hard currency. Suburbs such as
Kabulonga and Leopards Hill, will most likely retain their
premium status, much of the land in these areas is still
relatively cheap by African standards.
This could represent opportunity for densification as large
plots are subdivided and made available to developers for
higher density townhouses or apartments.
The middle market, defined as the market for monthly
rentals between ZKW5,000 – 10,000, has remained
resilient through both interest rate increases and the
relative economic slowdown of the past years. Analysis of
middle market neighbourhoods in the south of Lusaka
suggests a slow maturing of the market, possibly reflecting
the tighter economic conditions of recent years.
Review of the above suggests a slowing rental market
from an income perspective, as yields from rental
property have been higher in the past. Over the longer
term the limited supply to this market could ensure that
capital appreciation averages above 3.0-4.0% per annum
in local currency.
The middle market appears to be holding up better than
the top end, as rentals increasing appear to be at least
tracking inflation, if not exceeding it in some cases. As a
result, total returns, being the sum of net income and
capital appreciation are on track to beat inflation across
the middle market, despite recent challenges.
The lower middle market defined as the market for
monthly rentals between ZKW2,500 – 5,000 possibly
offers the most attractive yields to investors, is well
supported by demand and can be a large catalyst for
economic growth and financial deepening.
2014
Growth
(+/-)
2015
Growth
(+/-)
2016
Growth
(+/-)
2017
Lower-Middle Market
(ZKW 2,500-4,999 p.m.)
3 bed unit
Purchase price (ZMW) 350,000 375,000 400,000 450,000
Rental (ZMW) 2,900 5.2% 3,050 4.9% 3,200 9.4% 3,500
WHT & Ops costs (ZMW) 638 671 704 770
Net yield (%) 8.00% 8.00% 8.00% 8.00%
Middle Market
(ZKW 5,000-9,999 p.m.)
3 bed unit
Purchase price (ZMW) 570,000 600,000 630,000 700,000
Rental (ZMW) 4,000 7.5% 4,300 9.3% 4,700 8.5% 5,100
WHT & Ops costs (ZMW) 1,000 1,075 1,175 1,275
Net yield (%) 6.00% 6.00% 6.00% 6.00%
Upper Market
(ZKW 10,000-30,000 p.m.)
3 bed unit
Purchase price (ZMW) 950,000 1,200,000 1,980,000 2,200,000
Rental (ZMW) 10,000 20.0% 12,000 16.7% 14,000 5.4% 14,750
WHT & Ops costs (ZMW) 2,700 3,240 3,780 3,915
Net yield (%) 5.00% 5.00% 5.00% 5.00%
Residential rental and sales prices (2014 – 2017)
Source: UARE
32

Shifting the emphasis from home ownership to more easily
accessible business models, such as rental will be a good
start. Opportunities for further financial intermediation, via
rent-to-own schemes, provides further incentives to get
the housing sector working. Many countries that have
moved the housing priority from individual ownership, to
a model of encouraging access and affordability, have
made meaningful dents in their respective housing
backlogs.
Conclusion
For a meaningful housing development to take root in
Zambia, the industry would do well to focus on rental
housing for the middle and low middle income segments,
to create an alternative housing solution for occupiers.
The Government should look to leverage the successful
programmes of both developed and other emerging
markets. The Government could likely do more to create
an enabling environment for housing development via
changes to incentives (withdrawing VAT on home sales &
reducing rental WHT) for developers. These changes, will
in turn, allow more capital to be allocated to the sector.
The opportunity in Lusaka is large, offers profitability and
a long term hedge against inflation. Housing investment
has additional knock-on effects in respect of new revenues
for Government, in addition to the much needed job
creation and skills development dividends. The vast
majority of home occupiers, estimates suggest in excess of
80% of the market are currently renting. These housing
products for rent can be vastly bettered by professional
developers and herein lies the large opportunity for scale.
|Residential
The opportunity is large in any sense. Research compiled
by CAHF suggests that upwards of 4 million people
reside in this segment in what can be described as mostly
“expensive” accommodation.
Analysis by UARE suggests that the segment is largely
ignored by formal developers and financial institutions, a
peculiar market feature, given that this sector has seen
large growth and capital inflows across Africa. None more
so than in South Africa, where the residential sector is
increasingly being included in the portfolios of large listed
real estate companies.
The segment is constrained by a lack of financing
instruments for end-users or institutions. If they could
access better quality accommodation, better travel times
and social amenities for a similar monthly cost, the
segment could see a large swing towards formalised rental
or rent-to-own accommodation. Large scale
developments could realise an initial yield of 10.0% or
better on cost, with significant capital upside in the
medium term.
Apartments
The apartments segment in Lusaka is still very small, but
offers significant opportunity to meet the high demand
for housing. Serviced apartments have been particularly
popular within this asset class, servicing the top end of the
market for instance Fallsway Apartments and Shakespeare
Court. UARE believe however that the greater
opportunity lies with mid-end apartment development
($700–1,000 per month), where there is significant
demand.
The Housing Opportunity
The opportunity for Government, developers and the
institutional sector to repair the housing sector is
compelling. The sector offers possibly the largest single
opportunity for economic growth, speeding up Zambia’s
growth towards the end goal of higher-middle income
status. The market opportunity is in the range of US$40
billion, were the entire backlog be eradicated.
In the short term a more commercial focus on middle
income and lower middle income households could
deliver approximately 200,000 units, at a cost of US$6
billion. This will simultaneously unlock the multiplier
effect, creating thousands of skilled and semi-skilled jobs
and in turn establishing new revenue streams for
Government, that the informal market cannot replicate.
Roma Park
Source: Rendeavour
33

UARE Lusaka Real Estate Report 2018

UARE Lusaka Real Estate Report 2018

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to UARE Lusaka Real Estate Report 2018

Similar to UARE Lusaka Real Estate Report 2018 (20)

Recently uploaded

Recently uploaded (11)

UARE Lusaka Real Estate Report 2018