Market View Luanda

www.zenkirealestate.com October 2012

Trends
Prime Office
Rental Sales

SUMMARY
At the present time the supply of office space in the city of Luanda is insufficient to meet demand. Insofar as occupancy rates are concerned, in recently completed buildings, we estimate that 90% of available space is already taken up. This fact has kept rental rates in new buildings imbalanced compared to demand, from small and medium-sized companies, for new quality office space in the centre of Luanda. As a consequence, while values continue too high, the majority of these companies will continue to occupy precarious and non-functioning space. In the Zone 1 of the city the sale prices of gross office space is on average 8.500 USD/sq m. Rental values are between 120 and 180 USD/sq m. In Zone 2 of the city sale prices of gross office area is on average 7.500 USD/sq m. Rental values are between 100 and 120 USD/sq m.

Prime Residential
Rental Sales

= =

Prime Business
Rental Sales

= =

As far as the residential market is concerned there is good demand for recently completed homes, namely by companies which need a high number of units to house their staff. This situation has created a good dynamic in the residential investment market, essentially dominated by private investors. In the Zone 1 of the city sales prices of gross unit area is on average 9.000 USD/sq m. Rental values are situated between 85 and 110 USD/sq m. In the Zone 2 the sales prices of gross unit areas is on average 7.000 USD/sq m. Rental values are situated between 70 and 85 USD/sq m.

Hot Topics
Angola will show one of the highest growth rates in the world in 2012.
In the office market demand exceeds the offer. There is good demand in the residential market, specially from expats. There is only one modern Shopping Centre, Belas Shopping, nevertheless, it is projected the opening of two more units within the next two years. Yields are quite attractive, around 16 to 19% for the office and Retail market and between 12 to 17% for the residential market.

The new supply of retail space in recent developments, varies between the typical shop with street frontage to large developments of buildings with Retail galleries inside. Shops with street frontage have shown a good demand, essentially from banking institutions, insurance agencies or telecommunication companies. However, shops in retail galleries inside the buildings are more difficult to sell or rent. Monthly rentals of street retail shops which have been restored vary between 50 and 80 USD/sq m. In new buildings monthly rentals vary between 100 and 130 USD/sq m and sale values are situated between 6.000 and 9.000 USD/sq m. PRINCIPAL ECONOMIC INDICATORS Angola has emerged from more than four decades of war to become Africas second largest oil exporter and its third largest economy. Angola was vulnerable when the global financial crisis hit in 2009. Against the backdrop of international reserves falling by one-third in the first half of 2009, the authorities sought support from the IMF for their stabilization program. Overall macroeconomic stability improved in 2011. Oil production problems constrained oil sector growth, but non-oil growth compensated for the decline, resulting in an overall real growth rate of 3.9 percent. Headline inflation declined to 11.4 percent by year-end (13.5 percent annual average), helped by a stable exchange rate. The outlook for 2012 is relatively favourable, but affected by the recent decline in oil prices and other uncertainties. The pace of economic activity is expected to accelerate with overall growth at 6.8 percent in real terms. Inflation is expected to continue to decline slowly, to 9.6 percent by end-2012 (10.8 percent annual average).

Source: IMF; World Bank; ZRE Page 1 Page 1

OFFICES
DEFINITION OF THE ZONES

Market View Luanda

There are four distinct zones in Luanda, which concentrate the greatest part of office space on supply: Ingombotas District - Baixa (Zone 1): considered to be the Central Business District (CBD), concentrates the majority of prime buildings, occupied by the large companies active in the country. In this zone are to be found also old office buildings occupied by foreign and local mid-sized companies. A large part of government companies and financial institutions are located in this zone of the city. Upper town (Zone 2): supply directed essentially at small and medium-sized companies. For the most part office space available to and accessible by this segment are integrated into mixed buildings of residential and use by service companies or into residential buildings transformed into offices.

The greater part of new supply and in the planning stage is concentrated in the districts of Ingombotas and Maianga.

DEMAND/ABSORBTION In spite of high rents, the greater part of demand is for renting rather than buying due to the fact that the investment for acquiring office space, in a new building is quite high. The greater part of demand comes from companies linked to the Oil & Gas and financial sectors. More recently, the Angolan State has acquired various office spaces for its Ministries and administrative services. There is still a growing demand from small and mediumsized companies, however, prices are very high which obliges this type of company to occupy office space which is neither worthy nor functional. According to our market analysis, we estimate that occupancy rates for recently completed office buildings is higher than 90%. SALES AND RENTAL VALUES There is currently a pressing demand for office space, which leads to a rapid occupation of recently finished buildings. This situation has contributed to rental and sale values remaining high.

Praia do Bispo (Zone 3): is the most recent business zone of Luanda, and has grown for the centralisation of some administrative services of the state and office buildings, recently completed and for the majority occupied by companies linked to the financial sector and petroleum industry.
Talatona (Zone 4): is also a zone of recent offices, which in spite of being distant from the centre of the city, is an alternative to the CBD due mostly to more accessible rents.
Map of Luanda

1 2

V a l u e s

r e n t a l

Supply In Luanda, excluding the few existing prime buildings, the supply of the office market is characterized by residential buildings adapted for offices and mixed buildings with both residential and office space, in which the area reserved for offices is reduced, normally to one or two floors. The supply available for quality office space is weak, which is reflected in the rents charged which are amongst the highest in the world. Recently completed buildings have good quality with good finishings, however they have few parking spaces and the area per floor is normally about 500 sq m. V a l u e s

s a l e s

Page 2
2012, Zenki
Real Estate, Inc.

RESIDENTIAL
Supply The residential supply of the city of Luanda is characterized by the co-existence of distinct realities: Residential areas of poor and illegal construction, called Musseques that dominate the citys landscape, mainly in the centre which serve the classes of society with less economic power. We highlight the Samizanga, Kalemba, Marcal, Bairro Popular, Cassequel, Mrtires, Terra Nova, Cassenda, Prenda and Chicala.
Zone 1 Zone 2 Zone 4

Average Monthly Rental (USD)

Market View Luanda

T1 New 9.000 8.000 3.500 Used 2.000 1.500 2.500 New 12.500 10.500 6.000

T2 Used 3.500 2.500 3.500 New 15.000 13.500 8.000

T3 Used 6.500 4.500 5.500

Source: Zenki Real Estate

Residential areas from colonial times, in the meantime recuperated and in which are currently inhabited by the classes of society with greater purchasing power and diplomatic representatives, namely Miramar, Alvalade and Bairro Azul.
Residential areas aimed at the medium class such as Maculusso, Coqueiros, Vila Alice, Sagrada Famlia, Maianga, Kinaxixi, Cruzeiro and Combatentes mainly composed of buildings and houses that were occupied after the independence and have not undergone rehabilitation works. The new supply in the city of Luanda is essentially characterized by housing located in mixed buildings of offices and homes directed towards the mid-high and luxury segment.

Retail
Supply Retail in Luanda is characterized by the informal market, namely the direct sale on the street (zungueiros) and the existence of various casual markets. The recent supply of Retail space is restricted to the ground-floor and galleries of the new buildings that are rising in the city. The Angolan Retail is characterized by the presence of local or of African origin operators, with little international units. The few stores of leading international brands are scattered throughout the city, so there isnt a specific area for Retail. Belas Shopping situated in Talatona, approximately 20 km from the centre, is the most modern and emblematic shopping centre of Luanda. In the next few years, it is expected to open new large Retail spaces in the centre of the capital, namely Luanda Shopping, located in the Gika complex, and the Kinaxixi Shopping, located in the Torres of Kinaxixi. Downtown Luanda, also has a shortage of Retail units, to assist the office spaces and residential areas, such as restaurants, cafes, bookstores, stationery shops, laundries, hairdressers and grocery stores/supermarkets among others.

DEMAND/ABSORPTION The purchase of new and quality apartments, by the upper class, has been slowing down due to the small size of this segment. However, corporate demand, especially in the rental market for medium-high product, remains very active. This situation has created a good momentum in the market for residential investment, mainly dominated by private investors. RENTAL AND SALES PRICES

The new supply prices applied in the city of Luanda are summarized as follows:
Zone 1 Sale prices: 9.000 USD/sq m. Rental Values: between 85 and 110 USD/sq m. Zone 2 Sale prices: 7.000 USD/sq m. Rental Values: between 70 and 85 USD/sq m.

Edifcio Anfiris Lobito, Benguela

Page 3

Retail (cont.)
DEMAND/ABSORPTION

For more information, please contact: RESEARCH & CONSULTANCY Email: contact@zenkirealestate.com

Market View Luanda

The shops located on the ground floors of buildings facing the street have been occupied mostly by banks, insurance and telecommunications agencies, which represent most of the demand of this type of areas. Most of the demand in the Angolan retail market is characterized by local or by African origin operators, only a few are international operators. With the opening of the new shopping centres it is expected the entry of several international retailers, notably in the area of fashion, accessories and food & beverage. SALES AND RENTAL PRICES The monthly rents for remodelled shops vary between 50 and 80 USD/sq m . In new buildings monthly rents range between 100 and 130 USD/sq m, and sales prices are between 7.000 and 9.000 USD/sq m .

R. Comandante Stona, 278 Alvalade Luanda ANGOLA Tel: +244 934 838 383

ZENKI REAL ESTATE

VALUATION ADVISORY Real Estate Valuations

INVESTMENT
In recent years, the growth of the Angolan real estate market has been quite high, a result of the economic growth and the political stability of the country. However, the investment market remains in its very early stages, the result of still existing errors, in the regulation of the rental market and in the ownership of property. Yet, despite the transactions made in the investment market being predominantly independent fractions, yields are very attractive, around 16-19% for the office and Retail market, and between 12 and 17% for the residential market. Due to growing demand for large companies in the Oil & Gas sector, the residential market has been gaining a strong position and has become very attractive to private Angolan investors and private funds. Such companies supply guarantees that compensate the regulatory errors of the rental market in Angola. Due to the risks still existing in the country, associated to the profile of the Angolan investors, it is expected that the market yields remain high in the coming years.

Industrial Valuations Mortgage Credit

CONSULTANCY

Feasibility Studies Market Research Definition of Best Use

AGENCY CAPITAL MARKETS

DEVELOPMENT

www.zenkirealestate.com

Lubango centre Lubango, Hula

Zenki Real Estate Endnotes The figures presented were based on a study prepared by Zenki Real Estate. The study focused on pipeline key projects, construction and completed in the city of Luanda, with special focus on the districts of Ingombotas and Maianga.

Information contained herein is taken by us as good. Although we do not doubt its accuracy we have not verified it therefore we can supply no guarantees, warranty or representation of it. It is your responsibility to confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are just an example and do not necessarily represent the actual or future market performance. This information is intended solely for Zenki Real Estate customers, the same can not be reproduced without the prior consent of Zenki Real Estate.

Page 4
2012, Zenki
Real Estate, Inc.