Warehouse Shortage Spells Opportunity for Builders

A scarcity of quality storage space is driving up the prices of modern warehouses in Nairobi as retailers compete for the few available facilities, thus generating strong returns for commercial property investors.

Grit Real Estate Income Group reports that average warehouse rentals in the Kenyan market range between Sh375 and Sh484 per square metre a month, figures that are “likely to increase in light of the shortage of high-quality space”.

The Mauritius-based real estate firm notes that speculators have largely avoided the property class despite its highly promising growth outlook.

“Despite the recent rise in demand for warehousing in established industrial nodes, speculative development remains low,” Grit Real Estate said in a report on the Kenyan commercial property market.

“However, there are major master-planned industrial projects in the pipeline as developers seek to meet the needs of occupiers who require grade A, modern industrial facilities that meet international standards.”

The company has cited projects by Africa Logistics Properties and South African industrial developer Improvon Group as some of the developments that are likely to transform the Nairobi warehouse market.

Africa Logistics Properties is scheduled to deliver its logistics and distribution park by the end of the year within Rendeavour’s Tatu Industrial Park in Ruiru, 24 kilometres from Nairobi.

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The facility comprises 50,000 square metres of storage space, 14,000 square metres of which have been leased out to Freight Forwarders Solutions. ALP has also leased out 4,500 square metres of warehousing space to Copia Global, an e-commerce distributor.

“The ALP West project is another major industrial development which will comprise speculative and built-to-suit warehousing in Nairobi West.

“The project will encompass a total of 100,000 square metres of grade A warehousing units, measuring more than 5,000 square metres each,” Grit Real Estate said.

On its part, Improvon Group, in partnership with Actis, is set to develop industrial assets within its Northlands Logistics Park on Thika Road. The facility, according to its developer, will “feature best in class standards in respect of traffic circulation, yards and design”.

Grit, which has just been listed on the London Stock Exchange, is a key player in the local real estate market. The company owns the Mlolongo-based Imperial Warehouse, which it acquired in November 2016 from Imperial Health Sciences for Sh2.2 billion.

The company also owns a 20,200 square metre vacant plot of land adjacent to the Imperial Warehouse valued at Sh300 million. Grit also holds a 50 per cent stake in Buffalo Mall.

Demand for industrial space in Kenya is predicted to grow at 5.1 per cent annually, which means international logistics companies launching operations in the country will be competing for the available spaces.

“[This] should represent an excellent opportunity for growth and investment in the prime industrial sector,” JLL, a global commercial property firm, said in a report last year.

Embakasi is the main hub for warehouses for lease, while the Industrial Area has the majority of owner-occupied warehouses.

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