CBD properties less attractive, shunned by tenants
MARKET watchers have guided the Central Business District (CBD) office space to remain under pressure this year and continue experiencing increased vacancy rates.
This is expected to be one of the main trends that will be seen in the real estate sector this year.
The office CBD space has for long experienced challenges and become unattractive, forcing businesses to relocate to office parks or suburban offices.
Among the persistent challenges include parking, street vendors, and elevated pollution levels, combined with exorbitant rent hikes, high traffic congestion, noise pollution, over-crowdedness and the menace of illegal transport operators popularly known as “mushika-shika”.
These have contributed to what stakeholders in the real estate sector have termed the general decay of the CBD.
As a result, the demand for CBD office space has plummeted precipitously, resulting in an average vacancy rate of circa 50 percent according to research firm Equity Axis.
“However, it is important to note that demand has not vanished entirely; rather, occupiers have redirected their attention to the suburbs.
“Indeed, a multitude of prominent corporate entities have already made the strategic decision to relocate to suburban areas. Property owners are already seeking to capitalise on the geographical realignment of office preferences,” said Equity Axis.
The residential market, on the other hand, remains stagnant, with sales experiencing a lacklustre performance.
This can be attributed to sellers steadfastly insisting on transactions conducted solely in US dollars to preserve value, driven by their apprehension towards the depreciating value of the Zimbabwean dollar. Consequently, this stance has dampened demand, effectively excluding domestic buyers from participating in the market due to their inability to fulfil payment obligations in US dollars. But diaspora market is expected to remain strong as Zimbabweans living outside the country seek to invest back home.
Overall, in terms of investment opportunities within the sector and region, Zimbabwe ranks low, according to market watchers.
“When considering potential investment opportunities, Zimbabwe’s neighbouring countries come into focus,” said Equity Axis.
The analysts have placed their bets on South Africa, Botswana, Mozambique, and Zambia.
Said Equity Axis: “A comprehensive analysis of mean monthly prime rates for four-bedroom properties reveals distinct trends and variations in rental price dynamics across these countries.”
According to the research firm, Botswana emerges as an attractive prospect, boasting the most affordable rental rates across all sectors ranging from retail rentals, industrial rentals, or residential rentals as the country consistently offers economically viable leasing alternatives.
Peers, Mozambique also stands out with relatively higher rental prices, particularly in the office and retail sectors. These rates exceed those of the other countries under scrutiny, signifying a premium associated with leasing commercial spaces within Mozambique.
In terms of office rentals, Zimbabwe consistently falls below the regional averages in rental prices. Conversely, Mozambique consistently exhibits rental prices that surpass the mean, indicating a higher cost associated with leasing across all categories.