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By-passes fast becoming hotspots for warehouses

REAL ESTATE
By H&A correspondent | Sep 22nd 2016 | 2 min read
By H&A correspondent | September 22nd 2016
REAL ESTATE

The new by-passes around Nairobi have enabled a freeing up of transport routes with 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 Logistics Park.

This as a survey carried out by Knight Frank 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.

The Knight Frank Logistics Africa 2016 report — a review of Sub-Saharan Africa’s emerging logistics property sector —  has established that Nairobi lacks an adequate supply of quality logistics space, pushing some firms to invest in their own custom-built facilities.

“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,” said Ben Woodhams, Managing Director Knight Frank Kenya.

Occupiers of prime warehouses demand properties built to high technical specifications that support modern retailing, distribution and manufacturing practices. However, according to the report, the existing stock is old and mainly based in Industrial Area.

Prime logistics space in Nairobi commands a rent of $4.2 (Sh424) per square metre per month, a relatively low figure largely due to the quality of existing structures.

“Occupiers are willing to pay about $6 (about 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 $9 (about Sh900) per square metre per month due to existing building practices and lack of economies of scale,” said Woodhams.

Out of the 20 cities surveyed across Sub-Saharan Africa, Luanda has the most expensive rents for logistics space at $21 (Sh2100) per square metre per month, owing to limited supply, followed by Abuja (Sh1200), Accra (Sh1,000) and Maputo (Sh1,000).

Motorists on the Southern by-pass. The new roads are freeing up transport routes. The new by-passes around Nairobi have enabled a freeing up of transport routes with the intersections of these new roads have become hotspots for logistics park. (PHOTO: FILE/ STANDARD)

Nairobi’s prime warehouse rents compare to Kigali and Harare, which average $4 (about Sh400) per square metre per month, and Lilongwe at $3.94 (Sh394) 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 42nd in the index, out of 160 countries.

According to the report, rising demand for high quality logistics space is driven by retailers and consumer goods manufacturers seeking to expand their African operations and improve distribution networks and supply chains.

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