Africa’s logistics market boosted by rocketing online sales
Africa’s e-commerce market has continued to attract strong investor interest as overall online sales revenues increased by over 28%.
19 November 2021
The increase in online sales jumped sharply to USD $21 million in 2020 compared to 2019 across Africa. This uptick in online retail sales is set to continue, with e-commerce revenue expected to almost double to USD $46 million by 2025, according to Statista.
Click on any time to see E-commerce revenue (or expected) for that year
Consumer demand rising
With consumers demanding ever-faster delivery times, and the high costs associated with servicing the last-mile, retailers and logistics operators are pushing to improve their distribution models, reduce inefficiencies, and hold stock closer to consumers. This strong occupier demand to hold stock within urban areas is supporting investor sentiment.
In South Africa for example, requirements for new, modern, and efficient distribution centres remains stable and demand has outperformed all other asset classes and industrial sub-segments resulting in an overall income return of 9.2% and capital growth of 0.8% over the last 12 months.
A good example of the focus on prime warehousing space has been Takealot’s recent leasing of approximately 11,000 sqm of space in Montague Park in Montague Gardens. In addition, global e-commerce giants are also fuelling this flight to quality trend. This has been evidenced by Amazon’s inauguration of the largest logistics centre in Africa against the backdrop of their formal entry into Egypt.
Quality stock levels low
With good quality, existing distribution centres in short supply, increased occupier demand is putting upward pressure on land prices, as owner occupiers compete with institutional investors for the best development locations. Indeed, in some cities, land values in established industrial nodes have grown by 58%(Lagos) and 42%(Nairobi) between 2015 and 2021.
In addition, infrastructure developments such as the Chinese-built ring-road network in Nairobi are prompting some occupiers to explore areas beyond traditional industrial hotspots. As a result, these areas in the periphery of some cities have seen industrial land values appreciate by as much as 35% in the Namanve (Uganda) region and 34% in Nairobi between 2015 and 2021. With access to urban industrial land expected to remain a key barrier in the sector due to competing land uses, the value of prime industrial land in some cities appears set to continue rising for the foreseeable future.
