Warehousing shortage in Kenya hurts manufacturers
According to a report by a real estate developer, Tilisi Developments, almost a fifth of manufacturers in Kenya have lost sales in the past five years on a warehousing shortage that is getting sharply worse.
The survey released today details a response from 56 companies in Kenya, spanning manufacturing, pharmaceuticals, horticulture, logistics and retailers; found that 16% had sought new warehousing in 2017/2018, with a rising proportion failing to find any solution.
“31% of the businesses surveyed have suffered commercial setbacks caused by the warehousing shortage in Kenya in the last five years” it reads in part adding that some 43 per cent reported delays in meeting orders, while 29 per cent reported lost sales. A further 14 per cent said the difficulty and longevity of their search for new space delayed their expansion plans.
According to the co-CEO of Tilisi Developments Ranee Nanji, Kenyan GDP is being hampered excessively by the difficulties involved in finding new space for storing and sorting goods for distribution.
The business impact of the shortage was sharpest in manufacturing, despite being one of the pillars in the government’s Big Four agenda for development. But the greatest pent-up demand was found in the pharmaceutical industry.
In the last five years, 71 per cent of the pharmaceutical companies surveyed searched for new warehousing, and 43 per cent of them in the last year. It took many of them up to a year to find facilities, while others have not yet found a solution. Moreover, 40 per cent of them reported problems with their existing warehousing.
“By sector, the highest level of dissatisfaction with existing warehousing is in the pharmaceuticals industry at 43 per cent, followed by FMCG/ manufacturing at 38 per cent, and horticulture at 33 per cent,” the report by Tilisi stated. The firm has set aside 86 acres of its 400-acre mixed development for construction of warehousing facilities.
In Kenya, the average rental price per sq ft for warehousing is reported by Knight Frank at Sh44.6 per sq ft, which is higher than India, which stands at an average Sh22.0 per sq ft, but far lower than the US, at Sh750 per sq ft.
However, Kenyan warehouse rents have been rising at an accelerating rate, rising by 2.8% between 2013 and 2015, but by 11.5% between 2015 and 2017, as the country’s warehousing shortage deepened. As a result, the average of current market prices is running notably higher than the average price paid by all users, with most warehouse users locked into historical leases at lower rates.