What you need to know:
- Knight Frank noted a marked preference for industrial land in Bweyogerere, Namanve and Kawempe compared to 1st to 8th Street and Nakawa-Ntinda
A report by Knight Frank has indicated that during the year ended December 2023 there was notable increase in demand for industrial land in Kampala suburbs as a number of companies are seeking to expand or relocate out of Kampala.
The report, which covers the last half of 2023, noted that companies in automotive, manufacturing, interior design, pest control, pharmaceutical and beverages had driven up demand for land in suburban industrial areas away from the traditional areas in Kampala.
“Companies …. are driving up demand for land [in suburbs] with businesses looking to expand, relocate or startup,” the report reads in part, noting that a marked preference for industrial spaces in Bweyogerere, Namanve and Kawempe where land prices are more affordable compared to traditional industrial areas of 1st to 8th Street and Nakawa-Ntinda, had been recorded.
Knight Frank further noted that infrastructure improvements within suburban industrial areas, which had eased access to major trade routes had influenced the demand with manufacturers now able to connect to export and import markets, especially with East Africa and having an improved access to the Kampala Central Business District.
The Knight Frank Kampala Property Market Performance Review also reported that the real estate sector had during the last half of 2023 suffered stagnation with most businesses opting for cheaper suburban rental industrial spaces, away from traditional rental spaces in the Kampala.
The sector also recorded an increase in owner occupancy, while demand for industrial premises was highest for space measuring between 300 and 1,000 square metres. Spaces above 1,000 square metres recorded a decline.
Knight Frank also noted that companies had during the period exercised caution while buying industrial land or warehouse spaces, but there was an increase in the desire to purchase own occupied premises among industrialists on account of the need for operational control, long term growth plans and availability of capital, was recorded.
During the period rental rates remained stable compared to the second half of 2022 with rates ranging between $3 (Shs11,428) to $ 7 (Shs26,665) per square metres for warehouse spaces depending on size, location, and other factors. Industrial letting periods varied from three to nine months depending on various factors while long marketing and sale periods of more than six months were registered for large industrial properties.
“Growing demand for industrial space has led some landlords to increase their asking rental rates, especially within the traditional Industrial area. This has not been favourable for most tenants as they continue to drive harder bargains for the same forcing businesses to look for alternatives,” the report reads.
Construction in industrial areas
The report also noted that construction activity was observed in various industrial areas along Mulwana Road, Enterprise Park in Nakawa-Mbuya, in Namanve, Nalukolongo and Luzira industrial areas.
“In total, over 40,000 [square metres] of warehouse space is expected on the market in 2024 for both rent and sale,” the report notes, adding that with continued government investment in the development of industrial parks as well as focusing on infrastructure projects such as road construction in the Kampala Industrial Business Park, construction of the standard gauge railway, there is a likelihood of boosting and enhancing the attractiveness of the industrial real estate market.