Inside Politics

Developers shift focus as warehouse demand soars

Thursday, November 19th, 2020 00:00 |
Developers shift focus as warehouse demand soars.

Property developers are shifting to warehouse development due to a shortage of grade A warehouses and low yields in residential and commercial real estate.

High quality storage space has become the only growth frontier for developers in search of higher yields during the coronavirus pandemic.

“During the Covid-19 period, we have witnessed a build up of demand for modern warehouse facilities and consumer shift to online shopping,” said Africa Logistics Properties CEO, Richard Hough.

Multinational companies in Kenya are seeking specialised warehouses for their imports also known as grade A facilities.

The demand is also due to increased e-commerce activities and rising volume of trade with China. 

A recent study says on average, online retailers require 1.2 million square feet of warehouse or distribution centre space per million dollars of online sales, three times the requirement for that of brick-and-mortar retailers.

Also expected to fuel growth of logistics and warehousing market, in the long run, is the development of infrastructure and construction sector.

Latest investor

Africa Logistics Properties is the latest investor to take advantage of the the chaning market trends, launching a Sh652.8 million warehousing facility for small and medium enterprises (SMEs) at Tilisi Logistics Park on Nairobi-Nakuru road.

Major development projects such as Lamu Port South Sudan-Ethiopia Transport (Lapsset) Corridor project and Standard Gauge Railway (SGR), reduction of clearing time at the port and the adoption of the warehouse receipt system by the government are critical in driving demand.

Consumer behaviour shift to online shopping has also fuelled an already increasing demand for high grade warehouses.

Online retailers such as Jumia, Kilimall, Mall for Africa are driving demand for warehousing to balance supply and demand.

The sector is attracting new players in open yards, cold storage, retail, Fast-moving consumer goods (FMCG), horticulture and closed normal warehouses.

Traditionally most warehouses are located in Nairobi, Mombasa, Kisumu and Nakuru. However, new nodes are emerging in Ruiru, Kikuyu and Thika Road following  the completion of the Eastern, Northern and Southern bypasses.

Along the bypasses, there are emerging logistics hubs such as Tatu Industrial and Logistics Park on the northern bypass, Nairobi Gateway Logistics Park on Mombasa Road, Infinity Industrial Park on Eastern bypass and Tilisi Park on Nairobi-Nakuru road.

The government has also allocated Sh300 million for construction of cold storage facilities to cut post-harvest loss of bananas and potatoes in Kisii, Meru and Nyandarua.

“We will ensure that Jubilee’s Big Four Agenda programme is a reality by safeguarding food security,” Patrick Wainaina, a member of the parliamentary committee on Trade and Industry said on Friday.

The expansion of the Port of Mombasa throughput has also increased the volume of merchandise that need storage services.

Ministry of Agriculture and Capital markets Authority have adopted the warehouse receipt system that will avail storage facilities for farmers in exchange for a receipt that can be traded on the market.

The ministry has certified five warehouses across in Eldoret, Kitale, Nakuru and Nairobi where farmers will store their produce in exchange for a receipt.

Storage facilities

Property manager Knight Frank in their latest Africa Horizon survey said international retailers are lacking modern storage facilities forcing them to do with low grade small spaces.

Kenya’s location as a gateway to the region has also made the investment in warehouses a bankable business as goods that are not ready for haulage need storage spaces at the port or in Nairobi and Naivasha.

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