ZIMBABWE’S property sector is seriously under siege as the economy continues to face significant headwinds resulting in increased office surrenders and rent defaults.
The pressure on rentals and occupancy levels has forced many property-owning companies in Zimbabwe to make downward reviews on rentals in order to retain tenants as well as downward fair value adjustments of investment properties.
Francis Nyambiri, managing director of Pearl Properties, a Zimbabwe Stock-Exchange listed company, told a recent analysts’ briefing that the value of the company’s investment property came down by 4,10% or US$6,6 million to US$135 million after downward fair value adjustments. He added that the company also had to make downward rental reviews due to economic slowdown.
“We’ve received requests from tenants for downward review of rentals especially in the CBD office sector,” said Nyambiri, adding that the property returns have also declined in sympathy with declines in rentals.
Occupancy level at Pearl Properties were down by 1,74% to 78,54% as a result of both legal evictions and voluntary space surrenders, especially in CBD offices and industrial facilities. The office space portfolio was the most affected, with very low occupancies of 50,35%. Management is looking at reconfiguring its CBD office space to smaller suites that can suit small businesses in a bid to mitigate the haemorrhage.
Old Mutual Zimbabwe (OMZIL), which is one of the biggest investment property-owning companies in Zimbabwe, was also affected and was forced to make downward valuations of its property portfolio to US$408m from US$439m.
OMZIL MD Jonas Mushosho said the property business is characterised by “high levels of voids, increased rental arrears and low returns on properties”.
Falling occupancy levels have also resulted in increased property expense,s with management at Pearl Properties saying the rise in property expenses is a result of an increase in the impact of operating costs relating to vacant space.
At Pearl Properties, property expenses soared 19,62% to US$1,13m on the back of increasing voids and the accompanying costs of maintaining vacant buildings.
Another listed property entity, Zimre Property Investment, also made downward valuations of its properties amid weak demand for leased space which resulted in rising voids and debtors.
“Demand for commercial offices and industrial premises remained weak as the market experienced excess supply,” said management before adding that the performance of the company’s property portfolio was in line with the prevailing economic environment.
“Voids rose to 22% from 18,5% while property value consequently declined by 7,5% to US$46,5m,” said Zimre Property Investment.-fin24