THE commercial real estate segment is expected to remain an occupiers’ market due to excessive supply of space as the property sector is traditionally the slowest to react due to the nature of the asset despite expected growth in economic activity, The NewsHawks has learnt.
RONALD MUCHENJE
A real estate player, First Mutual Properties, in its first-quarter trading update, said the positive outcomes to the property sector linked to gross domestic product growth will be felt post-2021, as demand for space will be driven by any positive effect on the productive sectors of the economy.
Rental yields are expected to remain weak due to the slow nature of price discovery of rentals, coupled by limited upside on rentals due to excess supply of space, while recent revaluations of properties will apply pressure on any growth in yields.
Rental yields for prime assets are also expected to remain competitive due to limited supply of quality prime commercial real estate.
“Value preservation and cashflow management remains critical in the immediate to short term as the impact of Covid-19 on rentals, occupancy levels and cashflow generation evolves. To this end, the group will actively seek new tenants and improve space quality in line with occupier requirements to sustain occupancy levels and earnings,” the firm said.
Meanwhile, the company said the property market continued to experience low demand for space, with the central business district (CBD) office sector worst affected, while the retail and industrial segments of the market remained resilient with steady demand.
The office park sector continued to display resilience with steady demand while pricing of space continued to migrate towards inflation and currency-indexed models to preserve value, while there was an increase in foreign currency-denominated leases as property owners seek to benefit from provisions of Statutory Instrument 85 of 2020.
“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.
Revenue for the quarter increased by 411% compared to the corresponding period in the prior year, driven by rent reviews, higher turnover rentals and the occupancy level rising to 89%, mainly attributable to net lettings in the CBD office and retail sectors.
Net property income grew at a slower rate of 331% during the period due to re-investment in repairs and maintenance, to improve space quality and accelerate leasing efforts.
A total of ZW$7.037 million was spent during the quarter on property maintenance, while the business remained focused on accelerating digital strategies and talent retention.
Investment properties at 31 March 2021 were valued at ZW$9.663 billion following a directors’ valuation, representing a 3% increase from 31 December 2020.
