Investors focusing on modern industrial complexes are reaping the rewards while other real estate sectors struggle to regain profitability following a challenging year. The surge in demand for these complexes can be attributed to increased business activity facilitated by the Chinese-built ring roads in Nairobi, as well as the prospect of higher rental yields from contemporary warehouses.
Jiten Kerai, General Manager of Purple Dot International, which operates a 5 million square feet warehouse complex in Athi River, explains that Kenya’s position as a trade hub in East Africa, serving countries like Uganda, Rwanda, and Burundi, has led to the emergence of modern warehousing in response to the growing market demand. The development of infrastructure, such as connections to the southern and northern bypasses, has further propelled the sector’s growth. Additionally, the rapid expansion of e-commerce has driven the need for warehouses capable of handling large volumes of goods.
Improved economic sentiments after the Covid-19 pandemic and elections have also contributed to increased agricultural, manufacturing, and fast-moving consumer goods (FMCG) activities. Furthermore, the stabilization efforts in the Democratic Republic of Congo have been cited as a factor driving the uptake of industrial complexes and modern warehouses. Other reasons for the growing demand include the establishment of Special Economic Zones (SEZs) and data centers for multinational corporations.
Over the past eight years, since the completion of the ring road infrastructure, business nodes in the city have expanded by 42 percent, while land prices have appreciated by up to 32 percent. According to a report by property firms Knight Frank, industrial warehouses offer average rental yields of 12 percent, compared to 9 percent for retail and 6 percent for residential subsectors.
Real estate expert Arthur Ombati highlights the importance of affordable and sufficiently large land in proximity to the central business district. The well-connected Nairobi network, particularly the superhighway linking Athi River and Westlands, has made it possible to meet these requirements.
The rise of modern warehousing is ongoing, with more units in the pipeline. Harvest Industrial Park in Athi River, spread across 108 acres, is currently in phase 2 of development and is expected to reach phase 6 by 2024. Kerai notes that the growing demand in the import and export sectors has prompted investments in warehousing. Kenyan investors can anticipate the need for warehousing in the next 30 years based on location, infrastructure, and pricing.
Reports from various real estate publications, including Knight Frank, indicate an average 28 percent increase in rental prices for modern warehouses over the past six years, offering substantial opportunities for those investing in industrial complexes.
Bill Ndung’u of SVB Properties, a property firm, highlights the growing interest in ultra-modern industrial complexes as both clients and investors seek to either invest in or secure space in these areas. Traditional warehouses are gradually being phased out, with owners converting them to accommodate the new trend.
