Industrial assets attract more yields across Africa

Industrial assets across Africa are commanding attractive yields of approximately 12 percent on average compared to nine percent for both retail and offices and six percent for residential making the sector all the more attractive to investors, according to a new Knight Frank Industrial report.

Tilda Mwai, Senior Analyst- Africa, Knight Frank said, the 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. “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,” he said.

Government industrialization 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.

Agility Logistics Parks’ Senior Director of Strategic Planning, Ronald Philip, in an exclusive interview to Knight Frank said, “Grade A warehousing can be a silver bullet solution for FDI to come back in a nimbler and asset-light mode, where they lease instead of needing or wanting to build and own their own facilities in Africa, with all the attendant risks and delays.”

Overall, prime industrial rents have continued to portray a mixed performance. At USD 10 psm and USD 9.80, Kinshasa and Dakar, for example, rank as the most expensive cities for prime warehouses in Africa, while Blantyre (USD 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 USD 5.50 psm; down from USD 15 psm at the end of 2019.

Furthermore, prime rents have remained stable in some of the cities such as Cairo, Algiers and Maputo Tilda Mwai, Senior Analyst- Africa, Knight Frank also adds “Occupier requirements across the major markets are increasing with overall requirements ranging between 5000-10000 sqft 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 we monitor.”

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