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City warehouses losing out to business parks

With increasing costs of doing business in Uganda, companies are now looking for cheaper logistic storage space outside the Central Business District, global real estate consultancy firm Knight Frank have said.

In their Uganda Market Update Property report for the second half of 2017, Knight Frank says the industrial sector experienced a slowdown in leasing activity because of a sluggish economic performance. The biggest decline was in demand for warehouses/stores within Kampala, especially the industrial area.

According to Judy Rugasira Kyanda, the managing director at Knight Frank Uganda, the demand for traditional areas (1st to 8th street) has remained stagnant mainly because of pricing and lack of space for vehicles.

“Most tenants are opting for newly-built warehouses in the newer industrial areas of Namanve, Luzira, Nalukolongo, Kawempe, Ntinda and Nakawa,” Kyanda said.

Knight Frank research registered a 6 per cent increase in uptake of space in the Kampala Industrial Business Park (KIBP) at Namanve, which had been shunned over the years. Namanve is managed by Uganda Investment Authority (UIA).

“At Namanve, now rent ranges between $3.5 (Shs 12,600) and $5 (Shs 18,000) per square metre and this is likely to increase this year as more warehouses are being constructed in the area, and the demand for companies to move from town increase,” she said.

At Industrial Area (1st to 8th street), rates per square metre range from $5 to $7 or (Shs 18,000 to Shs 25,200 while Luzira and Nalukolongo parks charge between $5 and $6.

NAKUMATT CLOSURE

Additionally, Knight Frank said that in the second half of 2017, retail landscape in Kampala changed dramatically with the closure of Nakumatt stores and their subsequent liquidation. Nakumatt left a vacancy of 25,000 square metres in Kampala alone.

Marc du Toit, Knight Frank’s head of retail, said that the demise of Nakumatt had a negative impact on businesses and consumer confidence within the retail sector. The closure increased speculation against the performance of the economy in Uganda, he said.

"The factual barometer of retail would not be the closure but the speed at which the buildings are reoccupied. To date, all the space in Kampala vacated by Nakumatt has either been re-tenanted or in the final stages of being occupied,” he said.

A mini survey by The Observer around some of the malls shows that Victoria and Acacia Malls are being remodeled and, according to Knight Frank, sections of the two malls will be occupied by Shoprite, one of Africa’s largest retail chain stores.

Shoprite is not the only international retailer looking to expand in Kampala, others include Carrefour (a French company), Mac Cosmetics, Lintons from Kenya and Miniso (a Chinese company).

Their entry is likely to push up occupancy rates in Kampala. In 2018, Knight Frank is banking on increased activity from the oil and gas sector to drive demand in both office and residential segments. An upward turn in the economic activity would also help, although projections do not see it changing much from last year’s.

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