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Manufacturing sector poised to grow, but where is the storage?

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By Ben Oduor

The manufacturing sector is set for a major boom, as it features prominently on the government’s ‘big four agenda’ for the next five years. Nonetheless players have for the past few years decried inadequate supply of prime warehouse space for their goods.

Of the 52 companies polled across the country’s manufacturing, fast-moving consumer goods, pharmaceuticals, logistics, import/ export, retail and e-commerce sectors, by Tilisi Developments in 2017, 62 per cent reported they had experienced some kind of warehouse shortage in the recent past.

Others cited challenges caused by quality of their warehousing, with 60 per cent of users pointing to issues such as poorly ventilated spaces, leakages, power shortages and poor structural planning which caused difficulties in accessing goods within the warehouse.

While scarcity of such modern warehouses has forced some firms to invest in their own custom-built facilities, real estate consultancy firm Knight Frank notes that abundant opportunities have been created for developers since most of the existing stock is old and mainly located in industrial area, the only site that serves manufacturing plants within the city.

Development of mixed-use special economic zones such as Tilisi, Tatu City and Konza City is now taking shape, attracting many investors in the logistics space. One such firm exploring this green opportunity is Africa Logistics Properties (ALP), a specialist integrated property Investment Company that deals in modern grade A warehouses.

ALP develops new facilities which can include occupier built-to-suit requirement, acquires suitable modern yielding assets via sale and leasebacks and enters into joint ventures with occupiers seeking a modern supply chain distribution centre through the business model; tenant partnering.

“We strive towards reducing logistics costs by designing units that have specifications that allows three times the pallet storage density and increased operational efficiency,” says Toby Selman, the firm’s Chief Executive. “This reduces rental as well as operating costs by 30 and 60 per cent respectively.”

Before setting base in Kenya in 2013, Toby Selman had been supplying modern warehousing to emerging markets. It was while on a round tour of Africa visiting various capital cities to tap into promising business opportunities that the CEO got impressed by the various infrastructural developments that were underway in Kenya’s capital, Nairobi.

The city’s industrial market was increasingly opening up space for more investors, attracting multinational retail players as well as fashion brands. Unfortunately, there lacked adequate supply of modern warehouses to serve this ballooning market.

“An assessment of the business climate in Kenya at the time convinced us it was the right time to invest. And we established our headquarters in Nairobi to serve the region, being the economic hub of East Africa and a gateway to most sub-Saharan African countries,” Selman says. “We have since been working on a variety of projects.”

In April 2017, ALP announced it was investing Sh10billion to develop Kenya’s first Grade A warehouse facilities at two sites within Nairobi’s neighbourhood. The firm purchased some 22 acre piece of land at Tatu Industrial Park in Ruiru, Kiambu County, and began working on its first project- ALP North Logistics.

With the first two phases complete, the project, which features a 50,000 square metre logistics and distribution facility consisting of three separate warehouses, is set to open its doors to investors in September this year.

“Even though we’re yet to have occupants, almost 80 per cent of boxes 1 and 2 at the facility are already pre-leased, something that’s really encouraging. We are mainly targeting manufacturers, distributors, food companies and fast moving consumer goods, among others,” Selman says.

Once the project at Tatu City is complete, ALP will embark on developing its second investment- ALP West, which will feature an 80,000 square metre warehouse facility on 49 acres at Tilisi, along the Nairobi-Limuru Highway.

The projects are operated through ‘design, construct and manage’ business model to retain international standards and live up to the requirements of the Kenya Green Building Society, which ALP is a principal member.

A statement from the firm says ALP warehouses are designed with solar panels on the rooftops, insulated and fitted with cool roof systems, sky lights to reduce electricity usage for daytime lighting by up to 70 per cent as well as green spaces to reduce head island effect, minimising impact on microclimates and habitats.

The firm designs industry/retail warehousing, liquid storage facilities, commodity warehousing, cold storage and container storage facilities, targeting multinational companies seeking grade-A-supply chain facilities, regional companies interested in distribution centres and medium-sized local companies looking to rent warehouse facilities from 2,000 square metres upwards.

Having expanded its operations to West Africa, Morocco and Egypt, Selman says they are also looking for more business opportunities in Uganda, a country that has in recent years been working on attracting investors to its investment climate.

In an exclusive interview with the East African Business Times in November last year, Jolly Kaguhangire, the Executive Director for Uganda Investment Authority said the Agency had started investing more on developing the functional industrial parks covering four regions in the country.

“We are also evaluating models of improving on the available investor incentives, while focusing on tailor made services to enhance domestic investments,” she said.

But while such markets are poised to open more investment opportunities, Selman says they are cautiously optimistic while venturing in various markets.

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