Zim property sector remains depressed

ONE of Zimbabwe’s biggest property firms, Pearl Properties (Pearl), recorded a six percent revenue decline to $7,9 million in the full year to December 2016, as rental income and occupancy levels shrunk throughout the sector.

Group chairperson Elisha Moyo said the year under review had been characterised by low demand for space, increasing vacancy levels due to voluntary space surrenders and evictions compounded by increasing defaults, with most players in the sector suffering.

“These market conditions negatively affected rental levels and property values in selected sub-sectors of the property market, with the central business district offices and large factory and specialised industrial sectors being the worst affected,” Moyo said.

The group’s managing director Christopher Manyowa said the First Mutual Holdings subsidiary’s rental income declined by 7,36 percent during the year to $7,7 million from $8,3 million prior comparable period on the back of unfavourable property market fundamentals, which affected the office space sector.

“The Net Property Income (”NPI”) after administration expenses declined by 7,07 percent at $3,3 million (from $3,5 million mainly due to the reduction in revenue,” he said.

Occupancy levels remained under pressure during the year, declining to 71,77 percent from 78,74 percent with vacations largely within the Central Business District (CBD) and industrial properties.

The property portfolio was valued at $137 million 1,68 percent up from $135 million last year as a result of the reclassification of the company’s cluster house project — George Square Mews to investment property from inventory.

On a like for like basis, the portfolio had an impairment of 0,94 percent, driven by declining rentals and decreasing occupancy levels which were mitigated by an uplift in the suburban retail segment. The sectors most affected were CBD office and industrial.

In the year, tenant arrears marginally improved to $2,3 million from $2,3 million,
“Due to the liquidity challenges prevailing in the economy, tenant defaults remain high.

“With the weak economic fundamentals expected to persist in the short term, the key productive sectors of the local economy are expected to remain subdued affecting demand for real estate.

“To this end, the group expects 2017 to experience further downward pressure on rentals and occupancy levels…” Moyo said.
The country’s property sector has taken a hit from deteriorating economic conditions, which have seen continued weak demand for space.

However, Moyo said the group remained strategically positioned to exploit opportunities that may arise within the market, through its investments in brownfield and prime greenfield developmental sites.

“In addition, the group is actively pursuing refurbishments and reinvestment into the existing portfolio to enhance the quality of space available as well as maintain the long-term sustainability of returns,” he said.

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