The upswing in economic activity is boosting warehousing demand in Tanzania’s capital city Dar es Salaam, as monthly prime rents remain stable at US$5 per square metre for the past four years,
- •Demand is poised to rise, driven by recent offshore natural gas discoveries and ongoing infrastructure projects such as the new US$1.9 billion, 1,219 km national standard gauge rail network.
- •According to Knight Frank’s biennial 2024/25 Africa Report, the picture across Tanzania’s real estate landscape remains mixed, with the office market still hampered by an oversupply of stock.
- •Elsewhere, the retail market continues to be dominated by informal retail, with the formal retail market remaining oversupplied.
“Similar initiatives to unlock the full potential of the industrial sector are underway elsewhere on the continent, including the US$10 billion Bagamoyo Port I in Tanzania,” said Boniface Abudho, Africa Research Analyst at Knight Frank.
He points out that the rise of e-commerce in Africa is also driving requirements for efficient storage and distribution facilities, leading to the development of modern industrial zones equipped with state-of-the-art logistics infrastructure.
The residential market, particularly in prime areas like Oyster Bay and Masaki (Peninsular), stand out as the best performing areas, with rent in this location rising by 15 per cent – 20 per cent, over the last 2 years.
This surge in demand has also elevated prime rents in Dar es Salaam, which has experienced a 21 per cent increase over the past five years. Monthly rents for three-bedroom apartments have risen from US$2,900 in 2019 to approximately US$3,500 at present.
Developers are capitalising on the demand by bringing forward a raft of new residential developments, particularly in and around Peninsular, such as the Manhattan Garden (98 units) and 711 NHC Project (320 units), both of which are expected to be completed by 2025.
Informal Retail Flourishing
Tanzania’s retail landscape is characterised by an informal shopping culture, with an estimated 90 per cent of food and beverage sales transpiring through traditional small stores, street vendors, and unregulated markets.
Unsurprisingly, the retail market is predominantly under the sway of small-scale, primarily domestic retailers, a trend entrenched in long-standing consumer shopping habits that have hindered the flourishing of larger malls in the country.
The impending completion of Morocco Square and Dar Village, which collectively will introduce an excess of 65,000 sqm of additional retail space is expected to contribute to the ongoing oversupply of formalised retail space in the country.
Reflecting the subdued uptake of formal retail space, monthly prime rents have stagnated at US$18 psm, while occupancy rates have contracted currently at an average of 70 per cent from 65 per cent last year.
“Still, our outlook for the country’s retail market remains positive, underpinned by the combination of strong economic growth, diminishing inflation, and low rates of unemployment, which together will contribute to a rise in consumer spending, as well as confidence levels amongst businesses and investors,” said Knight and Frank in the report.
The Office Sector Remains a Tenants’ Market
Tenants maintain a dominant position, driven by an oversupply in the office sector. An example of a significant pipeline development in the country is the US$2 billion Morocco Square Project by the National Housing Corporation (NHC), which is contributing nearly 50,000 sqm of additional space.
Keenly aware of market challenges, landlords are flexible with lease terms, offering rent reductions and proactively renegotiating rents to safeguard occupancy levels, which currently stand at approximately 70%.
Monthly prime office rents of US$15 psm, while 12% lower than in 2020, are likely to be positively influenced by the country’s improved economic prospects.
According to the latest IMF forecasts, Tanzania is poised to record 6% GDP growth this year, outpacing neighbouring Kenya (5.3%) and Uganda (5.7%).
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