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Property voids double in Harare CBD

Property voids have nearly doubled from an average of 15% last year to between 25% and 30% this year with rates in Harare’s central business district (CBD) office as high as 50-60%.

Fidelity Mhlanga

According to the 2015 half-year property sector report released by Bard Real Estate, increased debtors have been noted in industry translating into high arrear rates from about 20% last year to 30% in 2015.

There is an oversupply of offices in the CBD as a result of downsizing, closure and re-location of companies from busy CBD areas to office parks and cheaper converted residential units especially in Harare.

The relocation has been attributed to high service charges in the CBD in contrast to outlying areas.

“Harare office rentals have declined from US$8/m 2 to US$4,50/m for new lettings. A downward trend has been noted on rates with regards to office parks due to general under-performance in the local economy. Rentals are therefore expected to continue sliding. The Harare CBD office market has registered a vacancy rate showing office rates per square meter-rentals have fallen 60%, the CBD is deteriorating as more companies throughout the country. look for cheaper and affordable space,” reads the report.

Ironically, churches have taken a leading role in occupation of industrial space.

Rates on industrial space have declined from US$3,5 per square metre in 2013 to US$1,5 per square metre in 2015 depending on the size in Harare. The industrial sector has been characterised by low industrial utilisation capacity, disinvestments, closure of operations, relocations, disruptions on production as some industrial buildings are now being used as places of worship.

“This sector needs, modern, efficient plant, machinery and equipment, an uninterrupted power supply, adequate supply of raw materials such as cotton, wheat and maize, low cost mortgage finance with long tenure, improved methods of production, an efficient transport system including resuscitation of the National Railways and attractive policy which allows investors to repatriate profits,” the report says.

The retail market has relatively performed better than office and industrial markets, although the effect of the informal traders on sales has not been quantified yet.

For prime retail space, there is wide spread decrease of retail rates throughout the country mirroring the economic performance, resulting in declined rates from US$25 million to US$15 milllion for the Harare market.

The report says most tenants are defaulting due to the current economic crisis, pushing the property yields downwards.

Most sales on residential properties are recorded on small stands and in the high density suburbs with a few sales being registered in top-end properties. Residential properties have seen a rental decrease of between 25-40% due to liquidity challenges and large numbers of unoccupied houses have been noted due to lack of tenants.

Bard is an internationally recognised property consultancy firm which deals in sales, evaluation, property management and other advisory services. It offers international valuation services, feasibility studies and plant and machinery valuations.

Municipality buildings are failing to attract tenants with vacancy surging from 15% in 2014 to 30% by June this year.

Accumulating portfolio arrears at 40% from 20% in 2014, is projected to increase to 50% by end of year.

“Zimbabwe economic crisis is now affecting both the poor and the rich. There is increasing legal costs due to debt collection and evictions, burdening service charges such as rates and water, infrastructural decay – dilapidated buildings in the CBD. Expensive financing and mortgage and increasing illiquidity of properties especially commercial properties,” the report says.

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