Industrial assets are commanding attractive yields of about 12% on average compared to 9% for both retail and offices and 6% for residential, according to a new Knight Frank Industrial report.
Government industrialisation policies, infrastructure development and e-commerce top the list of the main drivers of growth for the industrial sector across Africa. Knight Frank notes that increased competition for international investment has sparked a wave of new industrial policies and, subsequently, a boom in the creation of special economic zones (SEZs) has ensued across Africa.
“Appetite for industrial stock across Africa remains strong, with investors attracted to the sector’s strong income profile and positive market fundamentals such as rising urbanization levels,” says Ms Tilda Mwai, a senior analyst for Africa at Knight Frank. “With limited stock options, developers have had to act fast and plug this gap. Still markets like Nigeria present developers with an opportunity, recording the highest deficit of 1,000,000 sqm.”
Overall, prime industrial rents have continued to return mixed performance. At $10 psm and $9.80, Kinshasa and Dakar, for example, rank as the most expensive cities for prime warehouses in Africa, while Blantyre ($2.50 psm) is the cheapest.
Luanda, on the other hand, experienced the most substantial fall in average warehouse lease rates, which currently stand at $5.50 psm, down from $15 psm at the end of 2019. Furthermore, prime rents have remained stable in some of the cities such as Cairo, Algiers and Maputo.
Agility Logistics Parks’ Senior Director of Strategic Planning, Mr Ronald Philip, says Grade A warehousing can be a silver b****t solution for FDI to come back in a nimbler and asset-light mode, where they lease instead of building their own facilities in Africa, with all the attendant risks and delays.
Ms Mwai says occupier requirements across the major markets are increasing with overall requirements ranging between 5,000 and 10,000 square-feet size brackets. Still, the flight to quality is evident, with occupiers only keen to take up the best space in most cities. This has resulted in the emergence of a distinct two-tier market across the major industrial markets Knight Frank monitors.