Tenants desert CBD office space
AN estimated 60 percent of central business district (CBD) office space is vacant after demand plunged significantly last year, experts have said.
This comes as businesses are opting for office parks and suburban offices with residential areas like Eastlea, Belvedere, Alexandra Park and Belgravia proving popular for office space.
Property management firm Knight Frank attributed the rising voids in CBD office space to the Covid-19 pandemic, which forced businesses to resort to remote working.
Other businesses are also moving away from the growing disorderliness in CBDs over the past few years characterised by high traffic congestion, illegal vending, poor infrastructure, noise as well as the menace caused by illegal transport operators popularly known as “mushika-shika.”
“Demand for CBD office space to lease weakened and as a result voids have increased. “This is because of the CBD problems such as congestion, poor parking facilities, noise etc. High profile tenants have therefore relocated to suburban areas,” said Knight Frank in their latest Zimbabwe Property Market Report.
“Also because the economy has become largely informal and a lot of businesses do not require formal offices and can set up virtual offices from anywhere,” added the property management firm.
Resultantly, landlords incurred significant losses mainly due to rising costs for maintaining their buildings in addition to bills for vacant space.
Said Knight Frank: “Without tenants in the buildings, landlords are incurring losses thus results in buildings not functioning efficiently.
“This is because landlords must fund the repair and maintenance and pay the operating costs bills for vacant space and result in failure to maintain their properties to expected standards.
“Generally, landlords of commercial properties are sitting on high debtor balances. These have arisen because of debts incurred during lockdowns when trading hours were limited and the upward revision of rents due to inflation and depreciating value of the local currency. It is likely that landlords may have to write off some of the debts.”
To cushion themselves against further losses some landlords are repurposing CBD office space into small office suites for occupation by small businesses retailing various merchandise, which has seen retailing now being done on floors above the ground floors.
Rental rates for CBD offices in Harare have remained in the range of US$3 to US$8 per square metre depending on the quality and size while suburban rates are in the range of US$8 to US$10 per square metre. In Bulawayo the office rental rates are generally about 50 percent of the Harare rates, according to Knight Frank.
Due to the challenging economic environment worsened by the Covid-19 shocks, Zimbabwe has lagged behind in terms of large scale commercial property construction, at a time when other countries in the region have experienced a boom in property development mainly from South African investors.
“The local financial institutions who normally take a lead in property development and investment do not have an appetite for speculative development in Zimbabwe. The last high-rise construction was the Joina City,” said Knight Frank.
However, demand for suburban office space remains high with any space that becomes vacant due to tenant movement being easily leased.
“Going forward, high potential is seen in this segment together with residential where demand for low cost housing remains high.-The Herald
