Africa Logistics Properties develops A-grade warehousing in Kenya

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Africa Logistics Properties (ALP) is set to develop A-grade warehousing in Kenya, one of the fastest-growing economies in Africa.

The Central Bank of Kenya has forecast growth of about 6 percent for 2018, and ALP CEO Toby Selman says Kenya needs to offer better industrial space to companies that want to use it as a distribution centre.

Dominated by small-scale grade C warehouses that are of relatively poor quality, the Kenyan industrial market does not meet the standards demanded by manufacturers, e-commerce companies and pharmaceutical suppliers.

Selman said ALP is building logistics warehouses at a yield of 8.5 percent. Three years ago, the office and retail yields have fallen from about 11 percent to 8 percent, while residential property yields are now at 5.6 percent.

According to the CEO, “with Nairobi being East Africa’s key trading hub, businesses operating in the region are demanding access to warehousing facilities that are able to offer operational and costs efficiencies and safety and security, allow adoption of modern technology and double up as urban distribution centres”.

In September 2018, ALP’s first project, ALP North, worth $60 million was launched with a pre-let occupancy of 75 percent. This is while according to Knight Frank’s Kenya Market Update Report for 2018, the occupancy rate for new retail centres is between 60 percent and 75 percent.

Selman revealed that “the near complete uptake of ALP North prior to launch speaks to the fact that the product is addressing a specific need, meeting a specific demand that had not been addressed until now”.

ALP is currently constructing its second project, ALP West, which is twice as large as the first one,  at Tilisi Industrial Park, along the Nairobi Southern bypass, measuring 100,000m² on an 18-hectare piece of land. Users will be able to rent space from 1,000m² to 20,000m² from 2020 onwards.

The multi-tenant warehouses developed by ALP will allow local and regional companies in the logistics, retail, light industrial, fast-moving consumcer goods (FMCG) and e-commerce sectors to enjoy grade-A logistics warehousing for the first time.

ALP is backed by institutional shareholder investors CDC Group, which is a UK development-finance institution, The World Bank Group, DOB Equity, Maris and Mbuyu Capital.

Selman notes that in the next five years, ALP intends to invest in Uganda, Ethiopia, Nigeria, Morocco, Egypt and Cote d’Ivoire.

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