Africa Logistics Properties (ALP) has launched its first 49,000 square metres of warehousing at ALP North Industrial Park at Tatu City.
The management said that 75 per cent of the facility has been pre-leased.
“The near complete uptake of ALP North prior to launch speaks to the scale of the warehousing shortage in Kenya. But it also demonstrates that real estate requires developers to concentrate on the genuine areas of market need,” said Toby Selman, CEO of ALP.
The demand for warehousing currently exceeds supply in the country, with warehouse users reporting that finding suitable facilities is frequently impossible, according to recent research by Tilisi Developments.
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This shortage contrasts sharply with overbuild in some other real estate segments. The oversupply of commercial space in Nairobi reached 4.7 million square feet in 2017, while retail space oversupply reached 3.7 million square feet. Meanwhile, the supply of mall space rose by 41.6 per cent last year, even as demand stagnated.
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 per cent.
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,” said Selman.
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