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Industrial Property Best Performing Real Estate Sector Across Africa

By Estate Cloud - over 1 year ago - Kenya

Industrial Property Best Performing Real Estate Sector  Across Africa

Industrial assets across Africa are commanding attractive yields of approximately 12% on average compared to 9% for both retail and offices and 6% for residential making the sector all the more attractive to investors, according to a new Knight Frank Industrial report.

“Appetite for industrial stock across Africa remains strong, with investors attracted to the sector’s strong income profile and positive market fundamentals such as rising urbanization levels. With limited stock options, developers have had to act fast and plug this gap. Still markets like Nigeria present developers with an opportunity, recording the highest deficit of 1,000,000 sqm,” said Tilda Mwai, Senior Analyst at Knight Frank.

Government industrialisation policies, infrastructure development and e-commerce top the list of the main drivers of growth for the industrial sector across Africa. Increased competition for international investment has sparked a wave of new industrial policies and subsequently, a boom in the creation of special economic zones (SEZs) has ensued across Africa.

In an exclusive interview, Agility Logistics Parks’ Senior Director of Strategic Planning, Ronald Philip told Knight Frank that Grade A warehousing can be a silver bullet solution for FDI to come back in a nimbler and asset-light mode.

He said multinationals can lease instead of needing or wanting to build and own their own facilities in Africa, with all the attendant risks and delays. Overall, prime industrial rents have continued to portray a mixed performance.

At USD 10 per sqm and USD 9.80 per sqm, Kinshasa and Dakar, for example, rank as the most expensive cities for prime warehouses in Africa, while Blantyre (USD 2.50 per sqm) is the cheapest. Luanda, on the other hand, experienced the most substantial fall in average warehouse lease rates, which currently stand at USD 5.50 per sqm; down from USD 15 per sqm at the end of 2019. 

Furthermore, prime rents have remained stable in some of the cities such as Cairo, Algiers and Maputo “Occupier requirements across the major markets are increasing with overall requirements ranging between 5000-10000 sqft size brackets.

However, the flight to quality is evident, with occupiers only keen to take up the best space in most cities. This has resulted in the emergence of a distinct two-tier market across the major industrial markets we monitor,” said Tilda Mwai.

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