Economic decline bites property industry

HARARE - Zimbabwe's worsening economic crisis is having adverse impact on the country’s struggling property sector with vacancy rates in the industry increasing by 100 percent this year, a recent survey has shown.

Property consultancy firm, Bard Real Estate (Bard), say voids have ballooned from an average of 15 percent last year to between 25 and 30 percent this year — the main highlight being Harare central business district (CBD) office void rates averaging between 50 and 60 percent.

“Increased debtors have been noted in the industry translating into high arrear rates from about 20 percent last year to 30 percent in 2015. Most tenants are defaulting with the main push factor being the current economic crisis,” Bard said.

As a consequence of these factors, the property yields have come down as well as the country’s economy continues to battle a prolonged economic crisis that is wilting business volumes for companies.

Bard noted that the shrinking economy has stifled property development to such an extent that Zimbabwe has not had any cranes in the skyline for a very long time.

However, there have been marginal activities in housing developments particularly in the low income bracket, but even these are experiencing low take up rates with repayments being spread over a long period.

The report also revealed that the retail property market has relatively performed better than office and industrial markets.

This is despite a significant decline in prime retail space rates from $25 per square metre to $15 per square metre for the Harare market.

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

In the six months to June 2015 Harare office rentals have declined from $8 per square metre to $4,50 per square metre 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 above 60 percent,” read part of the report.

On the other hand, the industrial property market is experiencing high vacancy rates as churches have taken a leading role in the occupation of industrial space following the closure of most companies.

Bard notes that rates on industrial space have declined from $3,50 per square metre in 2013 to $1,50 per square metre in 2015 depending on the size in Harare.

“This has had ripple effects on returns and yields as they are now low overally,” the property consultant firm said.

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