Rental charges for prime warehouses in Nairobi have stagnated, a new tracker data shows, hit by slow industrial growth.
An analysis of the industrial property segment by real estate firm Knight Frank shows that the average rent for a prime warehouse in Nairobi has stagnated at Sh776.20 ($6) year-on-year, reflecting the turmoil in the country’s manufacturing sector due to high cost of production.
“Realising the country’s manufacturing potential requires decisive and strategic interventions. Implementing targeted tax incentives for local manufacturers, enhancing infrastructure development, ensuring access to affordable energy, and strengthening policy frameworks will be essential in fostering industrial growth and driving long-term economic resilience,” said Mark Dunford, CEO of Knight Frank Kenya.
Knight Frank says Kenya’s industrial sector remains constrained by high production costs, particularly electricity tariffs, and notes that this cost burden has led to business closures.
Data by the Kenya National Bureau of Statistics shows that Kenya’s manufacturing sector recorded real GDP growth of 2.3 percent in the third quarter of 2024, slightly lower than the 2.8 percent growth recorded in the same period in 2023. Growth in the third quarter of 2024 was largely driven by the food subsector, particularly sugar production.
The Knight Frank data, however, shows that the logistics and warehousing segment is witnessing sustained growth, driven by rising demand from multinational investors. The growth of e-commerce, agribusiness, and fast-moving consumer goods (FMCG) firms has also spurred demand for prime warehouse space.
“The increasing need for Grade A industrial space has prompted developers to expand their offerings. For instance, the Nairobi Gate Industrial Park Special Economic Zone (SEZ) has commenced the fifth phase of its expansion. This $7 million (Sh905.55 million) investment will add approximately 12,000 square metres of modular warehouse space” the real estate firm said.
Data from Knight Frank’s market tracker reveals that industrial rental rates in some key African countries have remained largely flat year-on-year, reflecting the region’s slow industrial growth.
“In Kenya, Tanzania and Malawi, rental rates have held steady at $6 (Sh776.20), $5 (Sh646.87) and $3 (Sh388.13) per square metre (psm), respectively, from H2 [the second half of] 2023 to H2 2024,” the firm said.
“While markets such as Botswana and Egypt demonstrated resilience with growing demand for Grade A industrial facilities and logistics parks, others, including Kenya and Nigeria, grappled with rising operational costs, currency volatility, and power shortages hampered industrial activity,” it adds.
