Nairobi, Kenya – A survey carried out by Knight Frank has established that Nairobi lacks an adequate supply of quality logistics space, pushing some firms to invest in their own custom-built facilities.
The Knight Frank Logistics Africa 2016 report – a review of Sub-Saharan Africa’s emerging logistics property sector – notes that occupiers of prime warehouses demand properties built to high technical specifications that support modern retailing, distribution and manufacturing practices.
As a result, the scarcity of high quality warehouses in Nairobi has created abundant opportunities for developers, even on a speculative basis. Typically, the existing stock is old and mainly based in Industrial Area.
Prime logistics space in the capital currently commands a rent of US$4.2 per square metre per month, a relatively low figure largely due to the quality of existing structures.
Ben Woodhams, Managing Director Knight Frank Kenya, said: “Occupiers are willing to pay about US$6 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 US$9 per square metre per month due to existing building practices and lack of economies of scale.”
Out of the 20 cities surveyed across Sub-Saharan Africa, Luanda has the most expensive rents for logistics space at US$21 per square metre per month, owing to limited supply, followed by Abuja (US$12), Accra (US$10) and Maputo (US$10).
Nairobi’s prime warehouse rents compare to the likes of Kigali and Harare, which average US$4 per square metre per month, and Lilongwe at US$3.94 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 LPI out of 160 countries.
The Logistics Africa report 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.
“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,” Woodhams said.
The new by-passes around Nairobi have enabled a freeing up of transport routes and the intersections of these new roads have become hotspots for logistics parks such as Tilisi, Tatu Industrial & Logistics Park, Northlands Commercial Park, Infinity Industrial Park and Nairobi Gateway Logistics Park.
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 to tap the growth of Africa’s middle classes and the associated expansion of its consumer markets.
Peter Welborn, Head of Africa at Knight Frank, said: “We anticipate that opportunities in this sector will continue to increase as African consumer markets grow and retailers and manufacturers require increased volumes of warehousing space. 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.”
With around 90% of Africa’s trade happening by sea, the continent’s ports remain crucial locations in logistics networks. However, infrastructure improvements will struggle to keep pace with the speed at which the continent’s economies are growing.
Consequently, innovative solutions have been proposed to overcome Africa’s challenging transport infrastructure. There are, for example, projects underway exploring the use of drones that could allow logistics operators to move goods to locations that lack reliable road networks.
Matthew Colbourne, Commercial Research Associate at Knight Frank, said: “Future demand will be shaped by disruptive technologies such as mobile commerce and drones, which have the potential to have a major impact on logistics property formats and supply chains in Africa.
Indeed, drones may prove to be a ‘leapfrog’ technology for Africa in the same way that mobile phones have allowed many Africans to skip fixed-line networks, moving straight to wireless technology.
To download the Logistics Africa 2016 report in full, please click here.
For further information, please contact:
James Waithaka, PR & Communications Officer, Knight Frank Kenya on +254 725 423 991 or firstname.lastname@example.org
Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank, together with its US alliance partner, Newmark Grubb Knight Frank, operates from 417 offices in 58 countries, across six continents, and has over 13,000 employees. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the company, please visit www.knightfrank.com or www.knightfrank.co.ke