How specialised services can cut development costs
Karen Koigi
Every business needs some sort of space. Whether it is an office or a place to put equipment, machines and staff to manufacture a product, they need a place to call their base of operations.
There is significant capital outlay required to develop a physical space for a business.
With high land costs that are still expected to rise, there is little advantage left for a small to mid-sized company to insist on building or buying its own facilities.
It is estimated that building a basic warehouse in Kenya can cost anything between Sh34,000 and Sh60,000 a square metre.
For a business that needs 1,000sqm of space, that translates to Sh34 million to Sh60 million.
And excludes the cost of purchasing the land, lawyers, professional consultants, taxes, loan expenses among others.
The pandemic has redirected business focus in various ways. Deployment of capital into real estate development is no longer a top priority for many businesses.
Many businesses can, at the moment, scarcely afford to sink more funds into buying and developing land and offsetting the numerous county and national government development fees, while still maintaining enough to keep staff emoluments going. Something will have to give.
Specialisation, fortunately, exists to save businesses the time and money that they intend to put into a costly infrastructure project and allowing it to be redirected into core business deliverables.
Property developers exist at every segment of the market poised to deliver on what is their core business, but would be a side operation for a business owner in a non-real estate segment.
High-rise office developers know how to aggregate steel, concrete and glass to create beautiful offices in central business districts.
Residential developers understand what a family needs, and how to improve the liveability of a space.
Warehousing developers understand the needs of a company that wants an industrial space for storage, manufacturing, processing or assembling various raw materials and finished goods.
As the pressures of advancing technologies and the economic fallout of the Covid-19 pandemic continue to drive businesses away from the traditional methods of producing, processing, and storing goods in a sub-standard facility, they also spur advancement in handling supply chain requirements.
Development of advanced warehousing facilities that not only supports today’s needs but also gives SMEs the opportunity to grow into tomorrow’s giants will be crucial to creating stronger businesses.
Kenyan businesses continue to show incredible resilience in the face of unprecedented challenge.
They are working towards economic recovery, which calls for prudence in selecting investments that will allow them to build back better, rather than sinking capital into projects that are outside their core business.
Companies that are looking to the future will understand that the modern world, with its large number of specialised services, offers the opportunity to reduce costs and improve resource efficiency as they pursue growth and sustainability. — The writer is the Investment Manager at Africa Logistics Properties
