eBusiness Weekly
Business Writer
Zimbabwe’s property market presents a fascinating paradox. On one hand, there’s a clear boom underway, particularly within the residential sector. Brand new developments, especially cluster housing projects in the suburbs, are experiencing brisk sales, some selling out entirely within a short period.
This trend extends to commercial and industrial properties outside the central business district (CBD), which boasts near-full occupancy rates. Fueled by a dollarised economy and increased demand from Zimbabwe’s diaspora communities, these new developments are a testament to a growing sense of optimism.
However, lurking beneath the surface of this apparent boom lies a disquieting counterpoint. The once-bustling Harare CBD is now dotted with vacant buildings, particularly older commercial spaces.
These empty giants stand is a stark reminder of the market’s fragility. Shopping malls like Highglen, Westgate, and Chitungwiza town centre, all owned by Old Mutual Zimbabwe, resemble ghost towns with significant vacancy rates. This raises a crucial question: is the current boom in new developments masking a potential property bubble, and if so, who stands to lose?
The rapid price hikes in the residential sector are a cause for concern. Prices in Harare have reportedly inflated to such a degree that some properties could fetch two similar or even better properties in South Africa.
This raises questions about the sustainability of such a market, particularly considering the average disposable income in Zimbabwe. Analysts warn that a correction could be on the horizon, potentially leading to significant financial losses for those who have invested heavily in the current market.
Listed Real Estate Investment Trust (REIT), Tigere REIT, paints a mixed picture in its latest report.
While acknowledging the positive impact of businesses migrating from the CBD to the suburbs, leading to a rise in suburban property values, the report also acknowledges the growing number of vacant properties within the very same CBD. This exodus is particularly evident in older buildings, highlighting a shift in preference for newer developments in the northern suburbs that offer a more modern ambience.
The reasons behind the exodus from the CBD are complex. Certainly, the shifting locations of businesses play a role. However, Tigere REIT also points to changes in traffic flow patterns, which can negatively impact accessibility for some properties.
Perhaps the most critical factor lies in the outdated infrastructure of some older buildings.
Malls like Highglen, designed for large anchor tenants, might not cater to the needs of current tenants who require smaller, more flexible spaces.
This is where the situation with Old Mutual becomes particularly concerning. The burden of its vacant properties falls squarely on the shoulders of its policy holders.
Old Mutual manages pension funds, essentially acting as a custodian of people’s hard-earned savings.
These funds are then channeled into investments, including real estate, with the expectation of generating returns for policyholders upon retirement.
Although the overall property occupancy is as high as 82 percent, there is concern that some properties have low occupancy levels.
These empty buildings not only generate no income but also require ongoing maintenance, further straining the company’s resources.
Ultimately, this translates into potential losses for policyholders, whose retirement nest eggs are directly tied to the performance of some of these properties.
Property consultant, Kura Chihota, weighs in on the situation, highlighting the importance of the city council taking an active role: “The city needs to defend its rates base by being open for business by being customer friendly. Aggressive parking fines and lax pavement management make the city unattractive.”
Chihota further emphasises the need for a clear policy on repurposing vacant buildings. “Repurposing of long-vacant multistorey commercial needs a clear policy from the city.
Johannesburg and Cape Town serve as ready examples,” he suggests.
This resonates with the challenges faced by Old Mutual, as simply adjusting rental rates might not be enough to fill these buildings.
Old Mutual is aware of the challenge and has outlined a plan to address it.
Samuel Matsekete, CEO of Old Mutual, acknowledges the low occupancy rates in some properties and attributes them to a combination of factors.
Firstly, businesses are drawn to newer developments in the northern suburbs that offer a more modern feel and improved amenities. Secondly, evolving traffic patterns can negatively impact accessibility for some properties located in the CBD.
Finally, the design of older malls might not cater to the needs of current tenants. Highglen, for instance, was designed for large anchor tenants, a model that may no longer be as attractive as smaller, more diverse retail spaces.
Matsekete outlines the company’s plan to address it. “We closely monitor occupancy rates and as you have observed, some properties currently have very low occupancy,” he admits. Citing Highglen Shopping Mall as a prime example.
Matsekete’s proposed solution involves a multi-pronged approach, including rental rate adjustments and repurposing buildings.
For some properties, adjusting rental rates can attract a new set of tenants and improved occupancy. However, significantly lowering rents could negatively impact the company’s bottom line.
In terms of repurposing buildings malls like Highglen might require modifications to accommodate smaller, more diverse businesses.
This would necessitate obtaining the necessary bylaw approvals and could be a complex and time-consuming process.
In very rare cases, a complete change of use might be necessary. Old Mutual has received inquiries about converting some properties into residential spaces, a concept not originally envisioned when the buildings were constructed.
However, as Chihota suggests, success will likely hinge on a collaborative effort between Old Mutual and the City of Harare.
“We adapt to the nuances of each property,” Matsekete said.
While the outlook for new developments remains positive, the success of Old Mutual’s strategy will be a key indicator of the overall health of the Zimbabwean property market.
Can they breathe new life into these vacant giants, or will they become permanent testaments to a bygone era? Only time will tell.
