According to the Africa Prime Industrial Report for 2017, Kenya is expected to become the logistics hub of the East African Region following the government’s recent infrastructure initiatives. The LAPSSET programme for instance, is East Africa’s largest infrastructural project consisting of a 32-berth port in Lamu expected to be completed by 2020, inter-regional highways to connect Kenya, South Sudan and Ethiopia, three international airports in Kenya and the expansion of smaller airports, and the Standard Gauge Railway from Mombasa to Nairobi, through Naivasha to Uganda and eventually to Rwanda, South Sudan and Ethiopia. The resulting transportation networks will be fuel for business in the region, leading to a demand in logistical facilities.
Currently, industrial property is clustered around Nairobi, Mombasa and Kisumu. The report by JLL, explains that the earlier industrial node establishments began in Baba Dogo, Nairobi, along Mombasa road but shortage of development land along those nodes has forced seen developers shift their attention to other emerging nodes such as Ruiru, Syokimau, Athi River, Eastern Bypass/Embakasi, Thika Road and Kikuyu. Further, the completion of the northern and Southern bypass has increased the appeal of these areas for industrial development with high uptake, where developers are able to fill spaces within a year of completion.
Tatu City has been a major highlight among these new emerging industrial zones. The strategically located facility, broke ground in 2015 with 120 off the 180 hectares sold off-plan. Already, Unilever has acquired 24 ha to expand its manufacturing operations in Kenya, while Africa property Logistics have set-out to develop modern grade a logistics distribution park on a 9ha piece of land in the area.
ALP has already agreed terms with an international occupier to lease 14000m2 of the 50000m2 development in what is the largest industrial lease to date in Kenya. ALP also acquired 20 ha of land in Western Nairobi at the end of 2016, where it intends to put up logistics property. Apart from the 186.9ha Tatu City Industrial Park, Tilisi Industrial Park; a 20 ha development, is another major industrial real estate development in recent times.
In the report, between 2017 and 2027, demand is expected to grow by an average of 3.6 per cent year on year. This will translate to 2,210,000m2. Broken down, demand in 2017 is at 1,490,000 m2 of space. From 2017 to 2022, an increase in demand of up to 220,000m2 is expected and from 2022 to 2027 a further increase of 410,000m2 in demand. The industrial property market is currently marked with high rental growth, low vacancy rate which have attracted investors although land value and construction costs have remained high.