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Industrial real estate backed as the new area of industry growth

Industrial real estate backed as the new area of industry growth

An under supply of A-grade quality warehouses, and high demand by tenants for quality spaces, has presented a number of new opportunities for development in East Africa.

In Kenya, the industrial scene is slowly starting to grow and it is soon expected to change the landscape of the country, largely due to key logistics developments like the Africa Logistics Properties (ALP) developments in Tatu City and Tilisi, Actis’s new foray into the sector, as well as Infinity Industrial Park.

According to the Broll Kenya Market Report H1 2017, to be launched on 5 April at the EAPI Summit in Nairobi, key challenges within the industrial market still comprise an undersupply of A-grade quality warehouses, lack of multiple access points from warehouses to major highways, increased levels of traffic in and around Nairobi, and incomplete government projects which are meant to boost the manufacturing sector.

“Kenya’s strategic location makes it a critical transportation hub for logistical warehousing,” said Gordon Bell, Director and Head of East Africa Operations, Broll Property Group.

Unpacking this growing trend, this year’s EAPI summit will once again feature leading real estate development and investment companies from over 23 countries, including representation from all country members of the East African community.

“This year’s EAPI Summit agenda focuses on unlocking new areas of growth for East Africa’s real estate markets. In keeping with the growing interest and opportunities in the regions’ logistics industry, we have been able to bring together the sector’s largest investors, developers and operators. CDC, Emerge Developments, The IFC, Actis, ALP, Improvon, Chandaria Group and Bollore Logistics will all share their views on how to tap into East Africa’s lucrative industrial sector,” said Kfir Rusin, Managing Director of API Events.

The cost of moving goods in Africa is estimated to be on average two or three times higher than in developed countries and transport costs can count for as much as 50-75 per cent of the retail price of goods. The recent announcement by the CDC Group, in partnership with the IFC, to invest in ALP’s Nairobi developments, shows growing investor support for development on the continent and in particular Kenya.

“The existing logistics and supply chain industry across Africa is extremely fragmented and inefficient due to a lack of quality fit-for-purpose infrastructure. This has hampered the development of much needed supply chain and distribution operating efficiency improvements, said Toby Selman, CEO Africa Logistics Properties.

“Africa Logistics Properties is addressing this by developing the first pan-African portfolio of built-for-purpose modern grade-A logistics and distribution centres across key target Africa capital cities for the occupier rental market. Our first two projects will be in Nairobi and our pipeline stretches across Sub-Saharan and North African cities,” he said.

The lack of quality international standard warehousing space has long been a constraint on business growth and economic development. Such new developments now aim to improve operational efficiencies by reducing waste from poor storage, increasing the speed of product delivery and improving product security.

Commercial property development within Sub-Saharan Africa has, over the last decade, been concentrated on both the retail and office sectors, while logistics development has been side-lined, often due to uncertainty over market demand.

With volumes increasing, so has the demand for high quality space from retailers and consumer goods manufacturers seeking to expand their African operations and improve distribution networks and supply chains. A number of logistics and industrial parks are in the pipeline as part of wider urban developments such as Rendeavour’s Tatu City near Nairobi and Roma Park in Lusaka. Well situated near main ports, these locations have been identified as hotspots for logistics developers.

It is yet to be proven, however, that occupiers can be attracted in large numbers into the new developments:

“Although clearly dissatisfied with their existing accommodation, occupiers need to accept that gaining the efficiencies of modern space could mean moving further out of town and may lead to rent increases of up to 50 per cent. This will be the big test for Actis and ALP,” said James Hoddell, MD of Emerge Developments.

“Looking at the rapid growth of demand for warehousing in East Africa, the future of the African logistics sector is a topic we can no longer ignore. There are important questions that need to be answered, as affordability is still a problem. Can the industry adopt technology to bring the building costs associated with warehousing down? In terms of return on investment, how does warehousing compare with commercial and retail sectors? These discussions will be important for the future growth of this sector on the continent,” said Rusin.

With more than 400 delegates registered to attend, this year’s summit will also discuss the move into Kenya’s counties, new infrastructure projects, student housing, retail oversupply vs opportunity, as well as the growing role of pension funds in East African real estate.

The two-day conference will be held from the 5-6 April at the Radisson Blu, in Nairobi, Kenya.

Some of the notable companies in the industry attending include Fusion Capital, Africa Logistics Properties, The IFC, Old Mutual, Sanlam, Mara Delta, Stanlib, Jones Lang Lasalle, Stanbic Bank, The NSE and Safaricom Pension Fund.

 

Soho launches Serviced Apartments in Kilimani, Nairobi

SOHO Serviced Apartments in Kiliman, Nairobi

SOHO Serviced Apartments has unveiled an ultra modern 11 storied serviced hotel apartment project in Kilimani, at a time when Nairobi has been listed as among the global cities set to enjoy a surge in short let accommodation.

Located along Kirichwa Road, the apartments offer luxurious 1 bedroom, 2 bedroom duplexes and 3 bedroom duplex targeting expatriate guests and foreign corporates working in Nairobi for a 3 – 12 month period.
“The location of SOHO Serviced Apartments is very convenient as we tap into the international organisations and embassies currently relocating their offices to this area, as well as its environs, such as Westlands and Upper Hill,” said Mr Rajpal Sahib, CEO of Realto Group Ltd.

Globally, a hybrid of hotel room and rental apartment, the number of serviced apartments in the world has grown by 80 per cent since 2008 to about 750,000, according to a report by The Apartment Service, a global provider of short term accommodation.

However, demand for the accommodation has grown by far more than supply in Nairobi and other key Kenyan cities.

Nairobi is currently the leading location in demand with searches for short let accommodation standing at 29.61 per cent, ahead of Mombasa at 14.70 per cent, and followed closely by Naivasha at 12.71 per cent. This is despite the fact that the city takes the crown for having the highest number of hotel rooms, with an estimated 58,071 rooms.

Part of the driver for demand for short let serviced apartments, instead of hotel rooms, is the chance they offer to set up a temporary ‘home’ complete with hotel like amenities.

According to Knight Frank, multinationals have also become more cost conscious when looking for short term rentals and are keen on cutting the expenses, hence are now showing an inclination towards serviced apartments rather than hotels on the basis of cost too.

“The hotel apartments provide a cheaper and homely option with most of them being in close proximity to all the recreational facilities that a modern lifestyle requires,” said Mr Rajpal Sahib.

According to research by the Apartment Service, a studio apartment in Nairobi costs about $64 per night, a big contrast to the walk in rate of an international-standard hotel room in Nairobi that would cost as much as g $220 – $350 a night.

This, coupled with the fact that internationally, serviced apartments in Africa cost, on average, less than anywhere else in the world, make such apartments an increasingly sought out option, with now 84.62 per cent of companies using apartments for business travel in Africa.

However, even as the demand for hotel apartments has skyrocketed in Nairobi, the rest of the country is even more severely under-served. In Nairobi for instance, the Kilimani area which has set itself apart as the most cosmopolitan of suburbs, boasts of high end apartments such as Yaya Towers Serviced Apartments, Palacina, Woodmere Serviced Apartments among many others.

In such well served areas, the serviced apartments are frequently booked out. “But with Kenyan tourism ranking 5th in Sub-Saharan Africa, investing in hotel apartments all over Kenya will provide variety not only to our international clientele, but also to our Kenyan tourists, giving them the option to have a homely visit while in Kenya,” said Mr Rajpal Sahib.

The demand for serviced apartments is also being pushed upwards as Kenya hosts an increasing number of trade summits and multinational dignitaries.

The SOHO hotel apartments, now under construction, will be completed by the end of 2017, and offer additional amenities that include a restaurant, gym, sauna and spa, poolside bar, tuck shop and a conference room sealing SOHO’s place as one of the first in a new wave of short term accommodation investments in Kenya.

Coldwell launches real estate CRM system in Kenya

Global real estate firm, Coldwell Banker Kenya, has launched a customer relationship management (CRM) system to drive sales for real estate companies in Kenya.

The system generates property leads, locally and internationally, directly to real estate firms’ email addresses, and helps firms profitably manage their property listings, conduct target marketing, track property payments and commissions, and run social media and e-mail activity tracking.

“The system is cloud based, and available on multiple servers replicated all over the world for security and scalability reasons. Users access its features using a username and password,” said Danielle Callaway, Managing Director, Coldwell Banker Kenya.

The CRM also manages contacts and personal schedules, provides reporting tools, assist in importing popular business software, such as QuickBooks for accounting, as well as acting as a referral network for agents within the system.

“Networking globally is the way to go for real estate companies that are banking on growing their business and remaining competitive in today’s real estate space,” said Callaway. “And lead generation is more than the traditional practice of ‘I know a person who wants to buy in a particular area’.”

“Selling a property requires multiple leads in order to increase the chances of it being sold quicker,” she said.

Currently, most property listings in Kenya are not personalized. If a potential buyer or tenant is looking for a three bedroom apartment unit to buy or rent in Lavington, for instance, many of the listings will give all the three bedroom apartments available in their databases, including those not in Lavington.

This can put off potential buyers, as the buying or renting process becomes cumbersome.

However, the Coldwell Banker Kenya system provides contact management systems where agents and real estate companies can get scalable databases and categorise them, with the system able to match buyer preferences specifically to seller offers.

The system links the properties from all Coldwell Banker agents with all other agencies within the CRM system, effectively pooling all buyer and seller leads, while enabling companies to see the top choices in their listings, see the serious buyers and the speculators, and also update their listings to show changes in availability dates, or when a house is sold.

The system also provides members with industry data and statistics, and works from its own internal data to show market trends in pricing, rents, selling timelines, and geographical activity.

In addition, it tracks every lead, including when an offer is made, when and how much commission is paid, how much of it is going to agent or to the company, the tax element if any on the commission and any other levy.

Coldwell Banker’s CRM system also provides online calendar facilities for planning across scheduled meetings, real estate showings, automatic reminders and all real estate related activities.

“The beauty about our system is that users can opt to adopt a calendar, or if they are already using a Google calendar, for instance, they can simply import it into the system and continue using it, except that it will now be integrated with all the other information in their CRM account,” said Ms Callaway.