Nairobi offers good investment opportunities for major warehouses: Knight Frank report
Sept 15, 2016: According to The Knight Frank Logistics Africa 2016 report, Nairobi lacks an adequate supply of quality logistics space, pushing some firms to invest in their own custom-built facilities. According to the report, the scarcity of high quality warehouses in Nairobi has created a huge demand for them. Knight Frank Kenya Managing Director, Ben Woodhams, said occupiers are willing to pay about US$6 (Sh600) per square metre per month in Nairobi for the same quality of space they would find in South Africa or Eastern Europe. However, local developers are struggling to provide such quality for purpose-built properties at less than US$9 (Sh910) per square metre per month due to existing building practices and lack of economies of scale. “Occupiers of prime warehouses demand properties built to high technical specifications that support modern retailing, distribution and manufacturing practices. Prime logistics space in the capital currently commands a rent of US$4.2(Sh400) per square metre per month, a relatively low figure largely due to the quality of existing structures,” Woodhams notes. Out of the 20 cities surveyed across Sub-Saharan Africa, Luanda has the most expensive rents for logistics space at $21 per square metre per month, owing to limited supply, followed by Abuja ($12), Accra ($10) and Maputo ($10). Nairobi’s prime warehouse rents compare to the likes of Kigali and Harare, which average $4 per square metre per month, and Lilongwe at $3.94 for similar space. In the Logistics Performance Index 2016 – a World Bank survey of operators providing feedback on the logistics ‘friendliness’ of countries – Kenya is placed second in Sub-Saharan Africa, after South Africa, with a score of 3.33 (out of 5). Globally, Kenya is ranked 42ndin the LPI out of 160 countries. The Logistics Africa report notes that warehousing is an emerging focus for development in Sub- Saharan Africa, as this property class is currently scarce across much of the region. “Due to a lack of supply, some occupiers are forced to develop their own property and then ultimately revert to a sale-and-leaseback arrangement as it’s not their core business to own property,” Woodhams said. The new by-passes around Nairobi have enabled a freeing up of transport routes and the intersections of these new roads have become hotspots for logistics parks such as Tilisi, Tatu Industrial and Logistics Park, Northlands Commercial Park, Infinity Industrial Park and Nairobi Gateway.