REGIONAL OVERVIEW
Africa
AFRICA
Opportunities outweigh impact of global conflict for African markets
Africa remains an attractive region for developers seeking cost efficiencies, with many markets sitting at the lower end of the global cost ranking, and some sectors in the region - like data centres - benefitting from relative insulation from conflict in the Middle East.
However, this low-cost picture is gradually evolving. Demand-driven inflationary pressure in construction stems from both local and trans-regional issues. This includes the ongoing diversification of important African economies, ongoing rural-to-urban migration fuelling residential growth and increasing emphasis on newer priorities such as data sovereignty.
BREAKDOWN DATA
TOP PERFORMING SECTORS
Residential and social housing
Commercial office development
Data centres
Local diversification but limited global integration
While Africa cities sit low on the overall global cost ranking, the high cost of construction is still cited as the second biggest challenge in our regional survey.
Lagos and Harare are forecasting the highest cost escalation for the year at 18.0 and 10.0% respectively, as they grapple with long-term structural economic issues. In Nigeria, headline inflation climbed to 15.7% in April. The average price to build in Harare is now US$2,108.0 per m² and US$1,927.0 in Lagos.
Costs are climbing in other African markets as a result of an increased push for economic diversification. In Botswana, where costs are forecast to grow by 4.0 percent, the Economic Transformation Programme (BETP) is transitioning the economy away from dependence on diamond mining. Instead, commercial office development is now the third biggest sector in Gaborone.
Africa is less integrated than some regions into global industrial supply chains, and this has helped to soften the impact of conflict in the Middle East.
As a result, material lead times perform well in the global comparison. Only South America and the United Kingdom have fewer materials than Africa which take over 41 weeks to arrive.
Energy costs a driver and a constraint
The impact of the Middle Eastern energy price shock is feeding into higher contractor fees, as they add surcharges to account for rising fuel prices, especially when transporting materials by road over large distances.
However, rising global oil and gas prices are also making African energy investment increasingly attractive, with an abundance of liquefied natural gas in Mozambique and Namibia driving demand and pushing up costs. The Ugandan government has set an ambitious goal of starting oil production this year. Our survey shows oil and gas is the top sector in Kampala, but that the inflation rate is forecast to double between 2026 and 2027.
East African markets in particular have invested heavily in affordable, renewable energy - especially solar - but power availability for new projects is still constrained by the slow pace of transmission line delivery. Planning hold-ups play into this, with delayed approvals and government red tape having a high impact on construction in Nairobi, Cape Town, Kigali, Kampala and Harare according to our survey.
Residential boost from urban migration
Housing demand in these markets is on the rise. Africa is the world’s most rapidly urbanising continent, with cities growing at an average rate of 3.5 percent each year, according to the United Nations. Residential and social housing is reported as the top sector across the region.
Migration from rural to urban areas is opening up a major opportunity for lower cost housing delivery – but in some cases, a lack of funding for projects leads to the creation of informal settlements. In the same vein, developers are poised to address a shortage of new mid-high-tier homes, but difficulty accessing credit poses a challenge to unlocking larger schemes. This is one of the most significant challenges cited by survey respondents.
Population growth in cities is also putting pressure on local infrastructure, and the construction required to make the necessary upgrades is squeezing capacity and feeding into rising costs.
Data centre boom puts spotlight on South Africa
Across the continent, several factors including an increased focus on data sovereignty, greater tech adoption and innovation and expectations of speed are propelling data centre demand. This follows residential and social housing and commercial office development as Africa’s third hottest sector in our survey.
South Africa leads the pack – with data centres top of our survey’s sector rankings in both Cape Town and Johannesburg – but these power-dependent projects face challenges securing a timely grid connection. While Johannesburg, at US$1,278.0 per m², has lower average construction prices than Cape Town (US$1,337.0 per m²), the Cape region has a more abundant renewable energy supply. For developers weighing up their options between the two markets, they will need to consider the added challenge of bringing affordable power inland to Johannesburg. This underscores the importance of assessing power availability early on to avoid delays further down the line.
Increased AI capability is also helping to channel investment into the construction industry itself. It is becoming increasingly important in tenders and discussions with clients, with almost 40% of regional respondents reporting a rise compared with 12 months ago.
Major election years put impetus on faster delivery
Across 2026 and 2027, a number of election campaigns will come to a head across the continent – including general elections in Nigeria and Kenya next year and local government elections in South Africa at the end of 2026. Clients should be alive to the potential impact on labour and materials availability, as projects that have seen delays to funding allocation enter the delivery pipeline.
Accessing public funding has been a challenge for some project teams in the region, reflected in our survey, with governmental and political instability considered a major concern, alongside government red tape and bureaucracy. Upcoming elections could provide some relief, especially for essential infrastructure and housing projects.
In any case, the public purse alone will not be enough for a number of major projects. Public-private partnerships are increasingly an option in the region for drawing in additional capital.
Boosting investment – as well as having a stronger understanding of power and capacity constraints – will help to deliver public projects more efficiently and at pace as the region looks to capitalise on a breadth of opportunities.
Cost data
AUTHOR
Wendy Cerutti, Regional Real Estate Lead, Africa
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