Office space take-up in Zimbabwe is poor with voids in some buildings increasing to around 30% owing to economic activity in the country, a leading property consultancy firm said.
By Chris Muronzi
In its Africa report, Knight Frank said tenants were struggling to meet rent and service charges.
“Voids have increased, in some buildings to over 30%. More than a year after it came on stream, the 12 000 sq m of office space in the Joina City development in Harare remains over 50% unlet. Two significant office developments, the Celestial Park and the Old Mutual project, with a combined lettable area of 26 000 sq m, are currently underway along Borrowdale Road and should be completed within the next 12 months,” the group said in the report.
“Property investment activity continues to be restricted by tight liquidity conditions, although notable recent office transactions have included John Boyne House (4 000 sq m), which achieved US$4,7 million and Star Africa House (2 000 sq m), sold for US$3,55 million.”
The property consultancy group said retail space, however, remained in high demand, both in the CBD and suburban locations.
Knight Frank said there had been an uplift in retail prime rents for new lettings in Harare of about 60% during 2012, but the sustainability of the achieved rents is doubtful in an environment of weak consumer spending. The Mall of Zimbabwe, a major new development with 68 000 square metres of retail space, was due to see construction commence in early 2013, with completion slated for 2014. With an estimated cost of US$100 million, it will be the single largest private property development in Zimbabwe.
On the industrial side, demand for space is not as firm in recent years, as Zimbabwe has become more of a consumer of imported goods than a manufacturing economy.
Knight Frank said void rates in industrial subsector were increasing while rents were depressed. Tenant viability is questionable in the current difficult economy, putting at risk the security of income streams.
“Industrial investments are considered the least attractive of all sectors and the recent sales have been entirely for owner-occupation,” said Knight Frank in a report.
The rental market remains weak owing to low disposable incomes and the absence of long-term mortgage financing has restricted residential market activity, the property group said.
“Some financial institutions have been able to secure external lines of credit to support mortgages for private purchases, but the secured loans have been for relatively small amounts over short periods, like 10 years at rates of 15-18% per annum, thus making them expensive for borrowers. Nevertheless, the market has seen price increases of up to 25% during 2012.”
Prime rents yields
Harare Offices US$12 per square m per month 8%
Retail US$25 per sq m per month 8%
Industrial US$4 per sq m per month 12%
Residential US$3,500 per month* 10%
Offices US$6 per sq m per month 9%
Retail US$15 per sq m per month 10%
Industrial US$1.50 per sq m per month 13%
Residential US$1,000 per month* 10%
Source: Knight Frank LLP *4 bedroom executive house – prime location
Lusaka prime rents and yields
Prime rents Prime yields
Offices US$20 per sq m per month 11%
Retail US$35 per sq m per month 10%
Industrial US$5 per sq m per month 13%
Residential US$3,000 per month* 12%