Real estate sector poised for growth

Real estate, construction and Infrastructure development sector is expected to grow in line with the Government’s general economic projections for the year 2023.

This year, Government has projected the economy to grow by 3,8 percent supported mainly by increased activity in mining, which should be a US$12 billion annual revenue sector starting this year, as well as growth in the agriculture sector among others.

With this anticipated growth, market watchers opine the real estate sector and construction and Infrastructure clusters should also see growth that tracks the Annual gross domestic product (GDP).

This growth will be supported mostly by public investments, although it may not be all rosy due to a host of challenges.

Road rehabilitation, dam, and housing house construction are some of the government-sponsored activities that are expected to bear fruit in the near term.

These economic development projects have presented growth opportunities for listed and unlisted entities in the construction sector to participate in the sector growth and thousands of jobs have been created for locals.

“We expect growth for the real estate and construction sectors to be in line with the government’s estimates of 3,7 percent and 5,8 percent in 2023.

“On infrastructure development, we opine that the treasury may need to make timely payments to contractors and suppliers to reduce the speculative behaviour in the market.

“Public-Private Partnerships (PPPs) should take the centre stage in infrastructure development to ease pressure on the government. The infrastructure funding gap in Zimbabwe presents investment opportunities for private equity to participate and earn reasonable returns as they are likely to receive much-needed support from the government,” said Akribos Research Services.

The sector has, however, faced a myriad of challenges across segments with rental growth in the office sub-segment coming off due to high and increasing vacancies in the Harare central business district (CBD) area. The outbreak of the Covid – 19 pandemic forced many businesses to resort to a hybrid working model which saw most businesses trim their office space demand while most people managed to work from home.

“Since then, the demand for traditional office space has failed to recover and the future of office space remains a hot and highly debated topic.

“Subdued economic performance has also seen reduced demand for industrial space resulting in high vacancy rates and declining rental yields. Some of the few remaining occupiers of Industrial space include importers and distributors of foreign products,” said Akribos.

The retail segment has remained competitive in the past year, but activity has been skewed towards small formal traders who have taken up space in the CBD providing low-priced goods that have grabbed the focus of constrained consumers especially.

In addition, the fast-growing e-commerce segment has reshaped the retail industry as there has been an increasing number of online groceries, furniture, and clothes.

“This has weighed heavily on the physical store’s revenues thus limiting demand for retail space for expansion purposes,” said Akribos.

On the other hand, the residential sub-segment has become a more robust market as the supply of affordable housing to low and middle-income households in Zimbabwe falls far short.

Zimbabwe has national housing backlog of about two million units while Harare alone has almost one million people on the waiting list.

Businesses into housing developments and construction related stocks like Willdale have seen firm demand for bricks coming from individual home developers while institutional developers have also come in. This demand is expected to continue on the back of growing new developments across the country, while construction of schools and other social amenities in newly established residential areas should further drive demand.

“The young demographic profile whose taste and preferences are driven mainly by convenience haven been demanding cluster and estate homes.

“These come with reduced costs of amenities such as security, common swimming pools braai, and entertainment areas as well as easy access to restaurants, schools, coffee shops, gyms, and shopping malls,” said Akribos.

Despite the growth projections, inflationary pressures, policy inconsistency coupled with 2023 being an election period may pose challenges to the sector and viability of the lined p projects.-ebusinessweekly