Builders cash in on rising demand for godowns by firms
The Bollore Africa Logistics tea warehouse in Embakasi, Nairobi. Photo/Courtesy
What you need to know:
Increased interest has seen developers diversify into industrial property.
Warehouses are considered to be cheaper and less taxing to construct compared to residential and commercial properties.
Major users of warehouses include producers of fast moving consumer goods and importers of heavy equipment for construction, energy and the nascent oil and gas industry.
Property developers are now turning to construction of warehouses following increased demand from companies leasing space for non-core activities like storage.
The increased interest has seen developers diversify into industrial property, spreading risks from the increasingly tight commercial and high-end residential space segments.
“The growth can be attributed to the current business trend to outsource non-core activities to supply-chain partners in order to maximise efficiency,” said Bollore Africa Logistics Kenya commercial director Gaurav Gupta.
Bollore Africa has doubled its capacity in the last five years to more than 100,000 square metres of warehousing space between Nairobi and Mombasa.
Major users of warehouses include producers of fast moving consumer goods and importers of heavy equipment for construction, energy and the nascent oil and gas industry.
AMS Properties, the developer Five Star Gardens — a residential quarters — is building 48 warehouses on Mombasa Road in Nairobi after dropping the idea of constructing a second phase of the residential apartments.
“We noticed there was a gap in the market. We have varied the size so that we also offer small space,” said a source at AMS who cannot be named for protocol reasons.
The warehouses measure 3,000 square feet and 6,000 square feet with the going price being Sh6,500 per square feet.
Other private developers with interest in the warehouse business include Erdemann Properties, developers of Greatwall Apartments. Erdermann has 15 units of godowns covering a built-up area of 120,000 square feet. Alpha Centre on Mombasa Road has 90 godowns on a 10-acre piece of land.
Warehouses are considered to be cheaper and less taxing to construct compared to residential and commercial properties. The selling period of the project is also shorter as the developer deals with a small number of buyers, mostly with an anchor lessee.
Renting rates of warehouse space currently average Sh35 per square feet or Sh180,000 for a 5,000 square feet godown but also attract a service charge of about 10 per cent.
Private developers also benefited from migration of customers from Express Kenya godowns following what the firm called security concerns.
“Most of the clients ended up losing their goods leading to a major migration of customers to other providers as well as an increment in the legal liabilities against the company,” said Express Kenya in its 2012 annual report.
Listed logistics firm, Express Kenya, which has 90,000 cubic metres of warehouse space, posted Sh59 million in revenue from its warehousing business in 2012. Last month, five men were killed at Express Kenya’s godowns in Nairobi following a botched robbery attempt.
Established logistics firms are banking on security and their specialised services to lock in their market.
“We have differentiated our services in that we not only offer warehousing space but a complete logistics package that is uniquely tailored to our customers’ requirement,” said Bollore Africa.
