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Warehouse firms cash in on tenants in rent crisis

REAL ESTATE
By Wainaina Wambu | July 23rd 2020

When the economic bite of the Covid-19 pandemic forced Paul to downscale his honey supply business, storage became one of his biggest headaches.

A nationwide restriction on movement to curb the spread of the virus that ended recently had also grounded his business activities.

The honey dealer says that paying rent for his shop in Roysambu became unsustainable and his house had no extra space for the stock.

“The corona period has pushed me to work from home and I needed somewhere I could store my honey produce and access it easily for sale whenever I needed it,” he told Home & Away.

Paul’s storage headache has become a reality for many small entrepreneurs, especially with the work-from-home revolution now accelerated by the Covid-19 pandemic.

Crafty entrepreneurs who sell products online are also keeping stock in their bedrooms.

And it is not only businesses that are facing challenges; people who are  moving out of Nairobi or the country for a short span also face a hard time finding a safe storage for their belongings.

This also means that residential tenants facing a rent crisis owing to the effects of the Covid-19 pandemic can store their belongings at an affordable rate for a short period as they figure out their next step.

The number of Kenyan households unable to pay rent owing to the pandemic has been rising.

Last month, the households in rent distress rose by seven per cent with a majority of landlords refusing to offer rent relief, government data shows.

And after the easing of the movement restrictions, a huge exodus upcountry has been witnessed as city life becomes harder to endure.?

Kenya’s warehousing market has for long been skewed towards big businesses that require large storage spaces of over 1,000 square metres.

The leases are also long term, consequently locking out dozens of individuals and small businesses.

Eventually, Paul was able to find a mini-storage space in Ruiru for as little as Sh10,000 per month without having to sign a long-term contract.

“The monthly option gave me the flexibility to rent safely in these uncertain times and not be tied to expensive long-term leases. The size is also affordable and will slowly help me expand my business,” he said.

The storage space Paul found is offered by Butterfly Properties Ltd (BPL), a real estate development and project management company that manages 500,000 square feet of space to tenants from various countries including Kenya, USA, India, UAE and Australia.

BPL Managing Director Nimeet Dodhia said there is a gap for professionally built and managed self-storage facilities.

This prompted his firm to develop the storage spaces, dubbed mini-stores, with space as low as 100 square feet where no long-term commitment is required.

He said demand for the storage spaces has risen due to Covid-19.

“Tenants have their own lock and key and can access the storage units any time during business hours. It’s storage on demand, rent it only when you need it,” Mr Dodhia told Home & Away.

Tenants can choose between a 10-feet or 20-feet one, with prices being Sh10,000 and Sh18,000 respectively.

The 10-feet container can store goods at a maximum of eight tonnes.

The facility is located within a walled compounded with 24-hour CCTV surveillance, security guards and controlled access.

The company also has moving equipment and workforce to help clients, and insurance options are also available.

“Mini-store provides an excellent service to help tenants understand the process of renting and using the space as well as providing the transport if needed,” said Dodhia.

The BPL facility is located in Ruiru Town.

Ruiru, as an industrial hub, has become the darling of investors and hosts numerous factories, including steel mills and textile makers.

Plans are underway to designate it into a city status and refurbishment of the Nairobi-Nanyuki railway is set to boost the town.

It is also a nerve centre connecting to Kenya’s key highways including the Thika Higway and the Eastern bypass.

Global property manager Knight Frank notes that activity is set to shift from Nairobi’s Industrial Area to emerging hubs such as Ruiru.

Poor infrastructure and land costs have also pushed out warehouses to outside the city.

Renting an A-grade warehouse costs above $6 (Sh640) per square metre, which is almost double that of the predominant current stock of older units that lack modern design features such as cross-docking and intermodal facilities, observes Knight Frank in its Africa Horizons report.

Retailers have also upped the demand for storage spaces. According to Knight Frank, the retail sector is a key source of warehousing demand.

“At present, many retailers import goods and make use of small storage facilities at their stores, but as retailers gain critical mass within Kenya, they are increasingly requiring large centralised warehouse,” says the Africa Horizons report.

It notes that retailers prefer to lease warehouses whereas food and beverage companies build their own facilities.

“This continued expansion of international and Kenyan companies is expected to generate demand for increasingly sophisticated logistics properties, particularly around Nairobi,” says the report.

With a booming sophisticated road network and the Standard Gauge Railway, Kenya has become East Africa’s top logistics hub, shoring up the demand for warehousing and storage spaces.

The most significant logistics and light manufacturing development to take advantage of this improved accessibility is the 457-acre Tatu Industrial Park, located in Ruiru, says Knight Frank.

In September 2018, warehouse solutions provider and operator Africa Logistic Properties (ALP) launched ALP North, its 49,000 square-metre Grade A warehousing park, which was 75 per cent pre-let showing the increased demand for warehousing, adds Knight Frank.

ALP is also planning a second project, a 100,000 square-metre logistics and distribution warehousing complex located at its 49-acre site at the Tilisis Logistics Park.

The Tilisi Logistics Park along the main highway to the west of Kenya will consist of a 100,000 square-metre logistics and distribution warehousing complex.

Another entity planning a mega warehousing development is Improvon Group, which is partnering with private equity fund Actis for the launch of  a 204,386 square metre warehousing development worth an estimated Sh11 billion.

Dodhia says the storage solution is ideal for entrepreneurs looking to expand their business in an economical and organised manner.

“For example, when you are a small business operating from home, it is not uncommon for work to spill into your bedroom, balcony or the living room. As the business expands, there simply is not enough room for all the inventory.”

He added that shop owners who need flexible and affordable storage could also use the units.

“It is difficult to keep inventory under control and our storage can help you better manage your day-to-day operations in an organised manner. The temporary storage can also help manage seasonal requirements by renting the space only when you need it,” said Dodhia.

Typical tenants include entrepreneurs running their businesses, individuals using it to store their home goods, people who are moving away temporarily and even corporates looking to store important documents.

“If you are moving, relocating or just want to declutter your home this is the perfect solution for your needs. Store your valuable furniture and home items and keep them from being stolen or broken,” said Dodhia.  

[email protected] 

Covid 19 Time Series

 

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