Other countries are overtaking South Africa as the sub-Saharan market’s warehousing and logistics property powerhouse. Nairobi has recently become one of Africa’s best-performing markets for industrial real estate, recording the highest increase in rental between 2020 and 2021. The city’s demand for logistics real estate is reflected in the fact that this type of property now accounts for 50% of the city’s new space requirements. Demand for modern warehouses continues to surpass supply across most African cities. Traditionally utilized by agriculture, the FMCG and manufacturing sectors have now also added a substantial boost for warehouse demand. Investor appetite for industrial stock across Africa remains strong. Investors are attracted to the sector’s strong income profile and positive market fundamentals such as rising urbanization levels which are driving demand for urban logistics facilities. In addition, industrial assets command attractive yields of approximately 12% on average compared to 9% for retail and offices, and 6% for residential.
Kenya, with its growing SME sector, has a great demand for the smaller industrial units between 50–1,000m2. 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. Despite industrial property being built speculatively, average occupancy stands at over 80%. Compared to pre-pandemic rental rates, Nairobi recorded the highest increase in average prime rents across Africa. While South Africa remains the largest and most sophisticated warehousing and logistics market, opportunistic developers are seeking to plug a growing gap. Kuwait-based Agility is developing over 1 million square meters of warehousing across Lagos, Abidjan, Maputo, and Accra, with plans to expand into other cities. The key drivers for prime warehousing demand are the same as in South Africa. While the penetration of e-commerce was already rising pre-Covid, online sales revenue has increased by over 28% to $27bn in 2020 compared to 2019 across Africa. This uptake in online retail sales continues, with e-commerce revenue expected to almost double to $46m by 2025.