Uganda tops East Africa peers in industrial property returns

Harvest Industrial Park in Athi River, Machakos County, sustainability is becoming an important differentiator within Kenya’s Industrial market. [Courtesy]

Investors in industrial properties are getting higher returns in Uganda, of up to 13 per cent, compared to Kenya and Tanzania.

The 13 per cent return highlighted by real estate consultant Knight Frank in its latest publication also ranks as the highest across the 10 markets analysed in its half-year release.

An increase in oil mining activities in the country has been cited as a key contributory factor to the returns and occupancy rates.

Apart from Kenya, Uganda and Tanzania, the other markets analysed are: Malawi, Egypt, South Africa, Zambia, Zimbabwe, Botswana and Nigeria.

Of the 10 markets, the cost of rent per square metre is also highest in Uganda, at Sh910 ($7). The same costs Sh780 in Kenya and Sh650 in Tanzania.

The lowest rent per square metre is in the Malawian capital city of Lilongwe, at Sh390. However, its returns are higher than Kenya's at 12 per cent.

The Africa Industrial Market Dashboard report states that Malawi’s industrial market activity is driven by import-dependent trade flows, Fast-Moving Consumer Goods distribution networks, and growing logistics requirements from businesses seeking reliable storage and supply chain solutions.

“Occupancy levels also remain strong, now averaging between 85 per cent and 95 per cent, reflecting the imbalance between limited available supply and sustained

occupier demand,” the report says.

In Kenya, the report shows that average yields held firm in the country at around 9.5 per cent, underscoring the sector’s resilience and continued appeal to institutional investors.

“Confidence in the market was further reinforced by the successful listing of the Africa Logistics Properties Industrial REIT (ALPI-REIT), backed by a combined Sh3.1 billion ($24 million) investment,” Knight Frank says.

The report shows how sustainability is becoming an increasingly important differentiator within Kenya’s industrial market.

“A good example is EDGE (Excellence in Design for Greater Efficiencies) certification awarded to the Nairobi Gate Mara Warehouse, reflecting the growing preference among occupiers and investors for

energy-efficient industrial developments that lower operating costs while supporting broader ESG objectives,” it adds.

For Uganda, the resilience of the sector is driven by sustained manufacturing growth, expanding logistics activity, and increasing investment in strategic industrial parks.

Occupancy in the period was sustained above 80 per cent.

“Prime yields of 12–13 per cent continue to position Uganda among the highest-yielding industrial markets across the markets we track,” says Knight Frank. “Prime industrial rents remained stable across the Greater Kampala market, ranging from Sh390 ($3) to Sh910 ($7) per square metre per month, depending on location and asset quality.”

Demand behind the 13 per cent return is being driven by manufacturing, logistics, construction, mining, and energy-related occupiers, with several structural trends reshaping the market.

“Cold-chain warehousing remains the most undersupplied industrial sub-sector, reflecting increasing demand from the agriculture, pharmaceutical, and food distribution industries,” the report says.

It adds that at the same time, lease tenures are lengthening for strategically important occupiers, particularly oil and gas contractors, who are increasingly securing long-term industrial space in anticipation of sustained activity associated with Uganda’s petroleum sector.

“These trends are reinforcing demand for modern, well-located industrial facilities

capable of supporting long-term operational requirements,” the report says.

In Tanzania, the average occupancy levels stand at between 70 and 75 per cent, underpinned by steady demand from manufacturers, logistics operators, import-export businesses, and regional distribution companies.

It points out that infrastructure development remains a key catalyst supporting the industrial market expansion. This has been seen in the continued government investment in road improvements, railway modernisation, and the expansion of the Port of Dar-es-Salaam is enhancing supply chain efficiency and increasing the attractiveness of the industrial and logistics sector.

It adds that government initiatives implemented through the Tanzania Investment and Special Economic Zones Authority (TISEZA) are encouraging manufacturing investment and foreign direct investment into industrial and logistics sectors.

“In parallel, warehouse operators are increasingly adopting advanced inventory management systems, warehouse automation technologies, and integrated logistics platforms to improve operational efficiency and enhance supply chain visibility,” the report says.