THE property sector is facing high rates of vacancy levels amid revelations that companies are surrendering space as the formal economy continues to shrink.
Listed property counters like Zimre Property Investments and Pearl Property reported high vacancy levels averaging 27 percent and cited the challenging economic environment as one of the main factors affecting rentals.
According to experts tenants are either surrendering their space or being evicted as the number of individuals requiring space continues to decline.
Market research analyst Mr Kudzanai Sharara said some companies can no longer afford to rent large spaces as business is low thus affecting rent collections for listed companies and other property owners.
“As occupancy levels go down, maintenance or operating costs for the counters go up because when spaces are unoccupied, it becomes the burden of the landlord to pay the rates to the local authorities and maintain the buildings in good shape,” said Mr Sharara.
Pearl Properties board chairman Mr Elisha Moyo said the Central Business District office sector and industrial sector were the worst affected sectors in terms of vacancies.
Mr Moyo said the property sector fundamentals remained depressed increasingly affecting the ability of tenants to service their lease obligations.
“Increasing defaults, declining occupancy levels, increasing evictions and voluntary space surrenders continue to prevail in the market,” he said.
ZPI board chairperson Ms Jean Maguranyanga in the company’s financial statement confirmed that effective demand for leased space and other real estate products remained subdued as the operating environment deteriorated further.
“Tenants continued to reduce leased space in order to manage business costs,” she said.
A real estate manager who spoke on condition of anonymity said since capacity utilisation was going down, most businesses were not doing well or folding and in such a scenario the last thing on their priority list becomes rent.
He said another factor affecting vacancy levels was the coming in of technology.
“People no longer have use for large spaces but can do business on the go whether it is online or on their mobile phones. It is important for property owners to redesign space in buildings to allow for more than one tenant and create smaller spaces,” he said.
He said to survive in this challenging environment, property owners should come up with rent abatements as an incentive or give low market rentals as it is better to get something no matter how little than nothing at all.
