Real estate investors have shifted their capital to warehouses deeming, previously attractive office and retail space to be oversupplied.
According to Nedbank head of property finance for Africa Gerhard Zeelie, the move to Kenya’s industrial and logistics sector is as a result of uncertainty over the long term prospects of demand for office space across the continent while retail demand exists only in pockets such as Rwanda and Uganda.
The Covid-19 pandemic has upended demand for office space as more companies observe remote working arrangements for their staff, while a tough economy has also hit the retail space especially malls due to reduced purchasing power among consumers.
In Kenya, Zeelie observed that industrial developers are actively upgrading industrial warehousing property, which has over the years become fairly outdated, hence this is an exciting focus area for financiers.
Repossessions and auctions of property
“We think that the industrial sector is well-positioned for growth. Nairobi has got fairly old industrial warehousing space, albeit rented put at a cheap level, and recently we have seen more modern industrial facilities being constructed. The industrial sector will grow on the back of more specialised distribution and logistics facilities that businesses are developing. We are also looking at some projects on the residential side, at least at the feasibility stage,” said Mr Zeelie.
Local lenders have also been cautious when lending to the real estate sector due to a high rate of defaults, which has led to an increase in repossessions and auctions of property.
Annualized growth in credit to the sector, which had risen to 9.1 percent in November 2020, slowed down to 5.8% in April, Central Bank of Kenya (CBK) data shows. Mr Zeelie said the only way for the sector to regain its footing is for developers to balance out supply and demand, by avoiding speculative construction that has left the market facing a glut in some segments.
