Why Industrial Property is Booming in Nairobi
By Estate Cloud - - Kenya
Industrial property now accounts for 50 per cent of Nairobi’s city’s new commercial space requirements.
The city’s demand for logistics real estate has grown over the past few years recording the highest increase in rentals between 2020 and 2021.
“There is no question that occupier demand is increasing across the continent”, said Inospace CEO Rael Levitt at the recent East Africa Property Investment Summit (EAPI).
He told Propetywheel that Nairobi has recently become one of Africa’s best-performing markets for industrial real estate, surpassing South Africa which still remains the largest and most sophisticated warehousing and logistics market.
“Kenya, with its growing SME sector, has a great demand for the smaller industrial unit between 500 – 1 000 square metres. The shortage of quality warehousing in SME- focused Nairobi has resulted in several local developers responding to growing demand by providing speculative prime warehousing over the last two years,” he said.
Average occupancy for warehouses stands at 80% in Nairobi according to the available data.
Investors have also been drawn to the sector since industrial assets command attractive yields of approximately 12% on average compared to 9% for retail and offices, and 6% for residential.
Over 150 000 square metres of prime warehousing has been added to the market in Nairobi alone within the past six years to complement increased infrastructural development along the northern corridor that links Kenya to Uganda and the Democratic Republic of Congo (DRC).
Tax incentives in special economic zones (SEZs) that encourage the establishment of industrial parks have also helped investments in the sector.
According to the UN Centre for Trade and Development (UNCTAD) estimates, Kenya (61) has the highest concentration of SEZs, followed by Nigeria (38) and Ethiopia (18).
Another driver of demand has been the continued growth of e-commerce where online sales revenue increased by over 28% to $27 billion in 2020 compared to 2019 across Africa.