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Nairobi lacks sufficient warehousing space, says report

By Patrick Alushula | Updated Thu, September 15th 2016 at 00:00 GMT +3

 

Nairobi lacks adequate logistics space to meet manufactures’ rising demand for improved distribution networks and supply chains.

This is according to the latest Logistics Africa report released by commercial and residential property services advisory firm Knight Frank.

According to the report, which offers a review of Sub-Saharan Africa’s emerging logistics property sector, the shortage has pushed firms to start investing in their own custom-built facilities to tap into growing middle class.

Most firms that occupy the existing warehouses, the report notes, are now looking for properties built to high technical specifications that support modern retailing, distribution and manufacturing practices.

The report attributes the rising demand for logistics space to manufacturers seeking to expand their African and the associated expansion of its consumer market. Peter Welborn, Head of Africa at Knight Frank, said this trend presents opportunity for investors.

“We see locations near ports, and along transport corridors connecting ports with inland commercial cities, as particularly important for operators developing logistics property networks in Africa,” he said.

Despite occupiers willing to pay about $6 (Sh606) per square metre per month in Nairobi for the same quality of space they would find in South Africa or Eastern Europe, the space is not easy to come by. As a result, the scarcity of quality warehouses in Nairobi presents opportunities for developers as most of existing warehouses are old and mainly based in Industrial Area.

This is according to Knight Frank Kenya Managing Director Ben Woodhams. “Local developers are struggling to provide such quality for purpose-built properties at less than $9 (Sh910) per square metre per month due to existing building practices and lack of economies of scale,” he said.

Currently, prime logistics space in the capital commands a rent of about $4.2 (Sh425) per square metre per month, a relatively low figure largely due to the quality of existing structures.

This rank closer with Kigali (Rwanda) and Harare (Zimbabwe) where rent averages $4 (Sh400) per square metre in a month. In Lilongwe (Malawi), the report says the rent is at $3.94 (Sh398) for similar space.

Out of the 20 cities surveyed across Sub-Saharan Africa, Luanda (Angola) has the most expensive rents for logistics space at $21 (Sh2,122) per square metre per month owing to limited supply.

Abuja (Nigeria) comes second at $12 (Sh1,213) followed by Ghana’s Accra ($10) and Maputo in Mali ($10). According to Commercial Research Associate at Knight Frank Matthew Colbourne, Africa’s future demand in logistics will be shaped by disruptive technologies.