Warehousing is a major bottleneck to companies in Kenya with 62 percent experiencing challenges in storing goods, according to a survey by real estate firm, Tilisi Developments Limited.
The survey, which polled 52 manufacturing, fast-moving consumer goods, pharmaceutical, logistics, import, export, retail and e-commerce companies indicates that 62 per cent reported that they have experienced some form of warehousing shortage in the recent past.
“Of the 62% of warehousing users that have experienced warehousing shortages, 35% said they had to rent out extra space, 10% were forced to deliver the goods directly to the clients’ premises rather than storing them, incurring extra costs, 12% expanded their own warehousing space, while 6% did not find any solution,” explains the report.
The companies polled also reported constraints caused by the quality of their warehousing with 60 per cent of users spanning both warehouse owners and warehouse 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
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 is 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 were approved 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 Netherlands, Columbia, Ecuador and Ethiopia. In 2014, Kenya earned more than Sh53.1 billion (US$531 million) from the 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 Sh10 billion (US$100 million) 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.
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.