The Covid-19 pandemic could just be the biggest headache for property firms in a while amid fears the work-from-home culture could persist even after the virus has been tamed.
BY TAURAI MANGUDHLA
Working from home, for most corporates, means they need less space, hence a likely surge in voids, analysts warned.
Although it remains to be seen how the future will play out, property firms in Zimbabwe are feeling the heat as an exchange rate crisis, hyperinflation and the impact of Covid-19 take a toll on their operations.
In a trading update for the quarter to September, the Zimbabwe Stock Listed (ZSE)-listed property firm, First Mutual Properties (FMP), said although inflation and the exchange rate have been stabilising, the operating environment remains challenging for sector players.
FMP said the property market remains susceptible to low demand for rental space, increasing vacancy levels and defaults.
It said while the residential market has been registering significant business, commercial sector transactions had been affected by price volatility and weak demand for space.
FMP said much of Covid-19’s impact on business was felt during the second quarter when rental reviews were delayed to give tenants breathing space as the pandemic intensified.
“Value preservation and cash flow management remains critical in the immediate to short term as the impact of Covid-19 on rentals, occupancy levels and cash flow generation evolves, as the macroeconomic environment remains uncertain,” FMP said.
“To this end, as occupiers reassess their space requirements, the group will actively seek new tenants and improve space quality in line with occupier requirements to sustain occupancy levels and earnings.”
Dawn Properties, which also trades its stocks on the ZSE and is heavily invested in leisure properties, said hotel revenue for the nine months ended September 30, 2020, at $65,3 million, was 54% lower than the previous year.
“This was mainly due to depressed occupancies as a result of strict lockdowns imposed by the government during the second quarter in response to the Covid-19 pandemic,” the firm said in a third quarter trading update.
Dawn said occupancy levels plummeted to 16%, compared to 41% previously.
Zimre Property Investment (ZPI) MD Edson Muvingi also said the pandemic had hit the sector hard, with business only improving after government relaxed lockdown restrictions in the past few months.
Markets analyst Batanai Matsika said the tourism sub-sector was the hardest hit as international travel slowed down, triggered sharp rises in vacant space.
“When you then look at commercial areas like the central business district (CBD), you find that there is a trend inspired by Covid-19 where people are now working from home, as a result companies are realising that space requirements may be reduced going forward and for property companies this increases voids,” Matsika said.
“People don’t really need offices when they are working from home.
“There is that new trend and a shift in mindset that do you need all this space or can we operate with a smaller space, that’s actually another trend that has been affecting property.”
He said currency instability had also affected pricing of properties as the market had switched to the green back.
“Remember banks are not really active in terms of giving people loans or mortgages in US dollars,” Matsika added.
“Because of that, property companies can’t sell a lot of stock when there is no financing.
“If banks provided US dollars financing, then it would make sense for them to move stocks like property sales, mortgage financing, housing and the like.
“Right now they are mostly depending on people in the diaspora or cash sales, which is not very sustainable.
“You need a market that is there locally for a mortgage system that works when you try to drive sales on the property side.”
Economist Chenayi Mutambasere said Zimbabwe missed out on an opportunity to upgrade buildings during the lockdown.
Mutambasere said a reduction in disposable incomes would force the market to review its property valuations and rentals.
“The rentals in Harare are so expensive that they have driven a lot of property activity away from the central business district (CBD),” she said.
“With reduced incomes, because of a global decline in turnover for companies, areas that had issues before will become worse.
“We need to see how we can derive benefit from the CBD and reorganise particularly for SMEs.
“If the CBD is expensive at a time income is not as robust because of Covid-19, it becomes less attractive.
“We should hopefully see a relook at property values.
“A working-from-home environment is not sustainable because of utilities.
“People have no access to water, electricity and internet connectivity especially those below middle management.”
Due to the exchange rate crisis, Mutambasere said, rental negotiations for downward reviews especially for tenants paying in hard currency are expected to persist.