Property developers in Kenya are currently experiencing a warehouse construction boom as demand for prime warehouses surges. In the wake of the on-going construction boom, developers have purchased large tracts of vacant land across Nairobi for new development. This is due to the increase in demand for prime logistics and storage space. The demand for industrial space in East Africa has rapidly increased faster as compared to other countries in Africa. Kenya is the main driver of growth because of its high growth rate as this presents an opportunity for growth and investment in the prime industrial sector.
Kenya’s logistics property markets have grown in warehousing supply to the tune of 15 per cent year-over-year. Nairobi’s supply of warehouses as at Q4 2018 stood at an estimated 1.2 million square metres, registering a 15 per cent growth close to 1.1 million square metres as at Q4 2017. Demand for industrial space in Kenya is expected to grow at 5.1 per cent annually, thus leading to increased competitiveness of available spaces as International logistics companies venturing into Kenya and East African region seek to meet the rising demand for such facilities.
According to reports by JLL, a global commercial real estate firm, expects the total demand in East Africa to surpass the total demand in West Africa for the first time. This growth has been attributed to rising demand from companies seeking to set up new industries in Kenya. Moreover, Britam Asset Manager also asserts in the same report that there will be a boom in Kenya. Multinationals setting up in Kenya are mostly seeking specialized warehouses commonly known as Grade A warehouses. The demand for logistics hubs is expected to continue to grow as companies shift from ownership of warehouses to concentrate on their core businesses in a bid to cut costs and boost efficiency.
“The Kenyan logistics sector is directly impacted by the performance of all sectors of the economy and in particular the industrial sector, which consists of the import and export of goods (warehousing). Kenya’s logistics market is largely driven by manufacturing, transport and storage, as well as wholesale and retail, while the establishment of Special Economic Zones (SEZs) has also facilitated the sector’s expansion,” says Vivian Ombwayo, Broll Kenya’s Head of Research and Valuations.
The most active sectors in the uptake of logistics include transport and storage (approximately 26%), manufacturing and engineering (approximately 23%) and wholesale ( approximately 22%). The demand is mainly driven by improved infrastructure, government support with regards to tax incentives, SEZ status and expanding retail Platforms. Another key driver of growth and investment in the market includes the expansion of port throughput attributed to major infrastructure investment into the new Standard Gauge Railway (SGR) link to Mombasa.
Commonly, most warehouses in the country are situated in Mombasa, Nairobi and Kisumu with major nodes located on Mombasa road, Industrial Area and Baba Dogo. New emerging nodes such as Thika Road, Ruiru and Kikuyu are becoming attractive due to the completion of the Northern and Southern bypasses. Prime logistics hubs currently underway in the emerging nodes include Tatu Industrial and Logistics Park on the Northern Bypass, Nairobi Gateway Logistics Park on Mombasa Road, Infinity Industrial Park on Eastern Bypass and Tilisi Park on Nairobi-Nakuru Highway.
The on-going infrastructure development across Nairobi and its environs have connected the city to satellite towns, additionally creating new opportunities outside Nairobi county. Modern logistics hubs are being set up in line with the high-tech specifications and demands of refined international tenants. The logistics sector is still in development in Kenya and growth is expected to grow especially in the demand of Grade A warehouse spaces.