Leveraging warehouse demand


The demand for grade-A warehousing, which delivers significant cost savings and efficiency for users, currently far exceeds supply in the country, with warehouse users reporting that finding suitable facilities is frequently impossible, according to recent research by Tilisi Developments.

This shortage contrasts sharply with overbuild in some other real estate segments. The oversupply of commercial space in Nairobi reached 4.7m sq. ft in 2017, while retail space oversupply reached 3.7 m sq. ft. Meanwhile, the supply of mall space rose by 41.6 percent last year, even as demand stagnated.

As a result, according to Knight Frank’s 2018 Kenya Market Update report, the occupancy rate for new retail centres is now running at between 60 and 75 percent.

This shifting balance of supply and demand has also changed relative investment yields, with commercial and retail yields falling from 11 per cent three years ago to eight per cent by 2017, while residential property yields are now running at 5.6 per cent. This has moved warehousing yields to pole position within real estate, at 8.5 per cent.

“The proportion of pre-leasing has also been driven by the quality of the warehousing, which just does not exist elsewhere in Kenya and East Africa at the moment,” says Toby Selman, chief executive at Africa Logistics Properties (ALP).

In the United States, the pre-lease rate recently rose to 43 per cent from a 17-year running average of 38 percent, according to a recent report by CBRE, a global leader in real estate services.

ALP’s distribution hubs have brought international design practices that now sharply boost efficiency and productivity.

For instance, the new warehousing offers pallet stacking 12 metres high instead of the four metres offered by others in the market, as well as large column grids of 12m by 24m, which results in denser storage capacity and reduces the cost per pallet by up to 30 percent.

The site also incorporates laser-levelled floors with anti-scratch coating that bear up to 10 tonnes. These allow the incorporation of automation systems, such as dock levellers, mechanised loading conveyors and fork-lift-mechanized loading, cranes and loading platforms, which together improve turn-around time and cut labour by up to 76 percent.

Traffic management flows also facilitate quicker turnaround times for trucks and deliveries, and the warehousing offers improved health and safety measures, firefighting systems with sprinklers, fibre optic telecommunications, and solar panels on rooftops for greater energy efficiency. (



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