The latest report from First Mutual Properties, one of the country’s largest real estate companies, indicates key trends in the economy. The company has real estate worth Z$9 billion, according to a Knight Frank valuation.
Here are some key insights from First Mutual Property’s 2020 financial results.
CBD offices? No. Retail and industry space? Yes
There is low demand for office space, especially in the CBD. This is no major surprise, given the decay in Harare’s CBD. However, there is still firm demand for retail as well as industrial space to rent.
According to First Mutual: “The property market continues to experience low demand for space, with the CBD Office sector worst affected, while the retail and industrial segments of the market remained resilient with steady demand.”
Office parks, but only good ones
While office space demand is low in the CBD, companies prefer office parks. And because it is an “occupiers’ market”, it is not just any office park that will do. Demand for office park space is “steady”, but tenants are looking for quality, location and supporting infrastructure.
“The office park sector continued to display its resilience with steady demand,” First Mutual says.
The company is responding to this demand by expanding one of its biggest office parks, Arundel. Design development of the architectural plans is already done and the company will float a tender for the project shortly.
Home property sales dominate
In terms of the buying and selling of property, activity is still mostly in the residential property sector. Companies are not willing to buy or sell property at the moment, a sign that uncertainty remains in the economy over inflation.
Says First Mutual: “Transactions within the property market continue to be concentrated around the residential sector. Commercial sector transaction activity remains subdued as property owners seek to hold onto assets as value preservation strategies. Development activity remains strong in the residential sector, while commercial development activity remains low due to subdued demand for space.”
Transactions in the commercial sector are low especially because of the impact the past year had on the service industry.
An SME, flea-market economy
While demand from big corporates falls, demand from SMEs is growing. A lot of large property owners are now responding by redeveloping their properties to cater for small businesses. This can be seen in the CBDs, where spaces once occupied by large department stores such as Barbours have been carved up for smaller traders.
First Mutual says: “The market has responded to the rising demand for space from the informal and SME sector by repurposing, adapting and developing spaces to cater for the special needs of this market segment.”
Commercal property development drought
There is some residential and industrial development, but not a lot of new development of commercial properties. There is too much commercial office space available, hence the low interest from developers.
“The industry remains wary of the high property development risk due to the oversupply of commercial real estate, limited project financing options and supply chain uncertainties. The few commercial developments on the market during the year have largely been equity-financed.”
Working from home? Not for everyone
How is the shift to “working from home” affecting the property market? First Mutual says the shift is not sustainable; people still prefer offices. However, developers now have to consider tenants’ changing tastes.
“Despite the shift towards remote working by corporates, experience to date has shown that this may not be sustained given power outages in residential areas and data connectivity challenges facing Zimbabwe. The preference for physical offices remains high, although the existing product needs to be adapted to become relevant to the emerging occupier needs.”
ALSO READ: New reports from Masimba, Cafca signal growing construction demand
