HARARE has witnessed an outward migration of office occupiers to suburban business parks since the early 1990s as demand for accommodation in the traditional central business district has dec
lined. International property managers and consultants Knight Frank in the report for 2004 say this decline was due to traffic congestion, lack of sufficient parking facilities, rising crime levels and the growing obsolescence of stock.
Harare has several office parks that have sprouted across the capital city such as Arundel Park, West Gate, Eastlea Park and Sam Levy’s Village. All these business parks have been in the low density areas where individuals have more cash to spend.
Several firms have also relocated to these prestigious parks.
Knight Frank says however a lack of development due to escalating construction costs had hampered occupiers’ opportunities to relocate from the city centre with less than 10% of stock being located in suburban office parks.
“No speculative development – of good quality and on a significant scale – was delivered to the market in 2003, ensuring the current supply scenario will continue into 2004,” Knight Frank said. “Government departments develop on an owner-occupied basis, thereby having a limited impact on the wider market.”
The company said office rents were slower to rise in price in comparison with other goods and services.
Prime office rents are now approaching those achieved on retail premises as the supply of good quality stock has dwindled.
“Grade A space in a suburban office park in northern Harare will achieve a rental of between $6 000 and $10 000 a square metre a month (US$1,33 and US$2,22),” Knight Frank said. “Rents in Bulawayo are lower at up to $1 300 a square metre (US$0,28). Typical lease lengths are now in the region of three years, having historically been five-year terms, with rent reviews every six months and the option for tenants to extend for a further two years.”
The company said running costs which were historically met by the landlord were now increasingly being met by tenants and could amount to well in excess of 50% of occupancy costs.
It said the major pension funds and insurance companies had traditionally dominated commercial property development and investment in Zimbabwe.
The soaring rate of inflation over recent years, however, has fuelled demand for property and equities in an attempt to hedge against rising prices.
A number of property companies such as Dawn Properties and Mashonaland Holdings Ltd have been created and have also joined the Zimbabwe Stock Exchange.
“Demand for office and retail stock is strongest as investors have attempted to avoid an over-exposure to industrial stock in light of the recent weak performance of the manufacturing sector,” Knight Frank said. “Investor participation in the market through the construction process has largely dried up as building costs have escalated, with a number of schemes having been put on hold.”
One such project is the Joina Centre in Harare, which has now become an eyesore for the capital city.
Investors say the foreign currency shortage, as well as erratic cement supplies are the major causes of the Joina Centre’s woes.