Real Estate
Demand for industrial space is
closely correlated to the strength
of the economy. The demand has
been seen to fluctuate in tandem
with contraction and expansion
of the economy and foreign
investment activity.
Tatu City has been a major highlight among these
new emerging industrial zones. The strategically
located facility, broke ground in 2015 with 120 off
the 180 hectares sold off-plan. Already, Unilever has
acquired 24 ha to expand its manufacturing operations
in Kenya, while Africa property Logistics have set-out
to develop modern grade a logistics distribution park
on a 9ha piece of land in the area.
ALP has already agreed terms with an
international occupier to lease 14000m 2 of the
50000m 2 development in what is the largest industrial
lease to date in Kenya. ALP also acquired 20 ha of land
in Western Nairobi at the end of 2016, where it intends
to put up logistics property. Apart from the 186.9ha
Tatu City Industrial Park, Tilisi Industrial Park, a 20 ha
development is another major industrial real estate
development set to make its mark.
Key leverage points
The Port
The Standard Gauge Railway has already done 472
kilometers from Mombasa to Nairobi with the second
phase already underway to its ultimate destination
which is Malaba. A total of 40 stations are to be build
along the line out of which 33 will be ready when the
railway line becomes operational.
The freight terminals will be located at Mombasa
Port and inland container ports strategically situated
at Embakasi and Naivasha to handle the anticipated
freight traffic. The railway line is expected to handle at
least 22 million tonnes a year of cargo or a projected 40
percent of Mombasa Port.
The race for who bears the title of East Africa’s
largest port, pitting Tanzania and Kenya is on. Kenya’s
Mombasa Port has been the de facto hub for East
Africa’s port business, but with the development of
the new USD$ 6 billion Bagamoyo Port, Tanzania wants
the whole pie. The new Bagamoyo Port will be 25 times
larger than the Mombasa Port, and this has inspired the
development of the Lamu port.
The expansion of the Lamu Port will see the Port’s
capacity match that of Bagamoyo Port that is set for
completion in 2020. This resurgence in infrastructure
development is necessitated by the open scramble
for prospective business from landlocked neighbors,
Rwanda, Burundi, Congo, Uganda and South Sudan.
Both ports are expected to have an annual shipping
capability of 20 million containers.
Demand for industrial space is closely correlated
to the strength of the economy. The demand has been
seen to fluctuate in tandem with contraction and
expansion of the economy and foreign investment
activity.
East Africa harbors the most potential for growth
in the coming decade with Ethiopia being the main
driver of this opportunities. The JJL Prime Industrial
Report of 2017 indicates that Ethiopia’s industrial
production potential coupled with a large population
of over 100 million. Ethiopia, alongside Kenya and
Tanzania who posted 3.6 and 4.6 percent year on year
growth respectively, combined demand could by 2018
surpass that in West Africa for the first time.
In the report, between 2017 and 2027, demand is
expected to grow by an average of 3.6 per cent year on
year. This will translate to 2,210,000m 2 . Broken down,
demand in 2017 is at 1,490,000 m 2 of space. From 2017
to 2022, an increase in demand of up to 220,000m2 is
expected and from 2022 to 2027 a further increase of
410,000m 2 in demand. The industrial property market is
currently marked with high rental growth, low vacancy
rate which have attracted investors although land value
and construction costs have remained high. TB
NOVEMBER 2017 • THINK BUSINESS | 23