Kenyan growth cramped by warehousing shortage

Almost two thirds of companies in Kenya are facing warehouse shortages, according to a poll released today by Tilisi Developments Limited.

Of the 52 companies polled across Kenya’s manufacturing, pharmaceuticals, logistics, import, export, retail and e-commerce sectors, 62 per cent reported that they had experienced some kind of warehousing shortage in the recent past.

The companies polled also reported constraints caused by the quality of their warehousing, with 60 per cent of users, both warehouse owners and tenants, highlighting quality issues.

These included poorly ventilated spaces, leakages, power shortages, and poor structural planning, which was causing difficulties in accessing goods within the warehouse. Respondents said this had increased the rate at which their stock was getting contaminated and in cases where food and flowers were being stored, it was accelerating their deterioration.

Kenya has experienced exponential growth in various sectors of its economy and population. Yet, this has been in contrast to the slow growth of quality warehousing to support and sustain it. This has led to a country experiencing a demand that is vastly outstripping its supply, said Kavit Shah, co-CEO of Tilisi Developments Limited.

Tilisi launched the country’s investment in a Grade A Logistics Park as a new real estate segment two years ago, last month selling 49 acres of serviced warehousing land to Africa Logistics Properties, which has been funded by the IFC, CDC and others, to drive a new wave of warehouse building across Africa.

We are now seeing other warehousing projects emerging too, and it is clear that the need is acute, said Kavit in a press statement on Wednesday.

Of the companies polled by Tilisi, half said they had sought new warehousing facilities, but pharmaceutical and food producers reported a scarcity in warehousing with cold storage, and of temperature controlled warehousing.

The international logistics companies also reported that modern well-configured logistics space and height was scarce, with the majority of Kenya’s warehousing currently falling short of international standards and constructed for small traders, rather than large companies.

However, investment in warehousing remains low. The 2017 Nairobi City County Permit Activity Reports from the Kenya Property Development Association (KPDA) reported 2,303 planning permits approved by Nairobi last year. Of these, only 199 were in the warehouse class, while commercial properties registered 809 applications.

Yet, Kenya is among the top five flower exporters in the world, alongside The Netherlands, Columbia, Ecuador and Ethiopia. In 2014, Kenya earned $531m from floriculture industry, exporting 125 tonnes of flowers. But research has shown that poor cold chain management sees about 20 per cent of the value of flowers wasted, equating to a loss of $100m for retailers, in addition to considerable losses for producers.

This has led to some occupiers developing their own storage space, but now reporting space constraints in achieving further warehouse expansions.

Of the respondents with in-house storage space, proper planning has ensured they have no issues with truck movement around their warehouses. But the respondents who were renting warehouses reported difficulties in both truck access and parking, with 40 per cent of the companies reporting that truck access to their warehouses was problematic.

The research also found that warehouses around the airports and shipping docks were providing better quality facilities than those located away from towns, but that this had led to higher demand for the urban facilities, and rising rents.

The reality is that in achieving adequate storage, companies are being forced to turn to Do-It-Yourself solutions in this one area of the real estate industry, in a way that is pushing them into building approvals, planning and servicing, adding new paper trails, and raising profound infrastructure challenges, said Ranee Nanji, Co-CEO of Tilisi.

Source: Kenya News Agency