Markets & Finance
Industrial warehouses edge out residential, retail yields
Tuesday July 04 2023
Graylands Phase 1-7 warehouse complex that is owned by Purple Dot International. FILE PHOTO | POOL
As the rest of the real estate sub-sectors slugger back to profitability after a particularly tough year, investors who focused on modern industrial complexes are smiling all the way to the bank.
Players say that the rising demand is driven by improved business activity riding on the backbone of the Chinese-built ring roads around Nairobi and the promise of better rental yields from modern warehouses.
“Kenya is a main trade hub within East Africa serving Uganda, Rwanda, and Burundi amongst other countries. Kenya has seen a rise in import and export trade in the last couple of years. This has led to the rise of modern warehousing in the country and better planned out developments that can serve the growing market from the congested areas,” said Jiten Kerai, General Manager, Purple Dot International who runs a 5 million square feet warehouse complex in Athi River.
Read: Modern warehousing key for firms’ efficiency
“The rise of infrastructure like connection to southern and northern bypass has seen the sector develop immensely. Rapid growth in E-commerce has driven demand for warehousing that can handle large volumes of goods,” pointed out Mr Kerai.
Better post-Covid and post-election economic sentiments have led to improved agricultural, manufacturing, and fast-moving consumer goods (FMCGs) activities.
The recent stabilisation efforts of the Democratic Republic of Congo are also among the reasons being cited by warehousing investors as driving uptake of the industrial complexes and modern warehouses.
Other reasons stated include the growth of Special Economic Zones (SEZs) and data centres for multinational corporations.
Graylands Phase 1-7 warehouse complex that is owned by Purple Dot International. FILE PHOTO | POOL
Industry estimates point to the fact that since the completion of the ring road infrastructure, the city business nodes have expanded by a whopping 42 percent in the last eight years while land prices have appreciated by as much as 32 percent in the same period.
According to a report by property firms Knight Frank, rental yields from industrial warehouses average 12 percent compared to 9 percent for retail and 6 percent for residential subsectors.
“Demand for ultra-modern warehouses has been boiling under for some time now. What previously lacked was affordable big enough land in areas that are still as close as possible to the central business district,” said Arthur Ombati, a real estate expert.
“The vibrant Nairobi network has made this possible, especially the superhighway linking Athi River and Westlands.”
In addition, modern warehousing is on the increase, there are more units in the pipeline. Currently, Harvest industrial park in Athi River, sitting on 108-acre land is on its phase 2 in development, having already utilised 10 acres and expecting to get to phase 6 by 2024.
“With the increase in imports and exports, most are now investing in warehousing due to the growing demand of the sectors. Kenyan investors can project the need for warehousing in the next 30 years based on location, infrastructure and pricing, ” said Mr Kerai.
Read: Real estate investors shift to warehouses on office blocks glut
According to reports by a number of real estate publications including property firm Knight Frank, there has been an average 28 percent increase in rental prices of modern warehouses in the last six years, meaning a boom for those who put up industrial complexes.
Graylands Phase 1-7 warehouse complex that is owned by Purple Dot International. FILE PHOTO | POOL
“Ultra-modern industrial complexes are ranking highly among the areas that clients and investors alike are either scouting to invest in or are looking for space to set up shop. The era of the old warehouses is quickly fading away and even those with such units are quickly converting them to accommodate the new trend,” said Bill Ndung’u of SVB Properties, a property firm.
Twitter: @Morris_Aron
