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Enacy Mapakame
The central business districts (CBD) office space in major urban centres remained depressed during the second half of financial year 2023, with voids expected to worsen, according to analysts’ projections.
This comes as the property market in general continues to experience limited activity, primarily centred around commercial and industrial sales and development.
A market update for the sector for the period under review shows vacancy rates ranged from between 40 percent and 60 percent and projections indicate a potential increase.
According to real estate consultants, Knight Frank Zimbabwe, the subdued performance is driven by corporate relocations from large office spaces to suburban areas.
The relocations have largely resulted in an increase in voids, although budding small to medium enterprises (SMEs) are taking up space, repartitioned into smaller spaces to accommodate their small businesses.
“Demand for CBD office space primarily originates from small and medium-sized enterprises (SMEs) seeking minimal space,” said Knight Frank.
As companies laid off staff due to operational challenges and the Covid-19 pandemic, the employees resorted to start their own businesses mainly apparel, beauty and hair products as well as electronic gadgets retailing.
This boom in the SME sector especially the retail side, has seen landlords repartitioning space into smaller units to meet the rising demand from the SME sector. In Harare’s CBD, big companies like Meikles and Mashonaland Holdings, have repurposed their buildings to accommodate the SME retail sector.
This also comes as the rate of new office development from both institutional and private entities in Zimbabwe remains low, according to Knight Frank.
Notably, The Strand Corporate Office Park stands out as a significant prime office development situated along Borrowdale Road.
Comprising ten subdivisions ranging between 7000 and just over 9,000 square meters, this premier office park commands asking prices of approximately US$125 per square metre.
The transition to predominantly US dollar rentals in the office sector has been slower compared to the residential market, largely influenced by corporate entities, which constitute the majority of players in this sector.
According to the market update report, rental rates in the CBD range from US$6 to US$10 per square metre for office spaces, contingent upon the condition and amenities offered by the respective office premises.
“Overall, the demand for suburban offices continues to thrive, with vacant spaces in these areas being readily leased compared to those in the CBD,” said Knight Frank.
The yield achieved in the CBD remains at 8 percent. Notably, financial institutions and privately-owned firms are driving the construction of new headquarters and leasing properties in suburban locations.
Listed banking group NMB, is one of the institutions that have led this trend, while FCB is also working on the construction of its new headquarters in Borrowdale. Property firm, WestProp Holdings also indicated its board approved the development of a modern headquarters in Borrowdale.
This also comes as businesses shy away from CBD challenges ranging from high traffic congestion, parking space, dirty and smelly alleys, noise and air pollution, the menace from illegal transport operators and vendors and what has been termed the general decay of the CBD.
Suburban offices command monthly rental rates ranging from US$12 to US$15 per square metre.
Online Reporter