Listed property firm Zimre Property Investments Limited (ZPI) says it plans to change the use of some of its properties in Central Business Districts (CBDs), as the performance of that segment continues to weaken.
Some of the indicated alternative uses include student accommodation, boutique hotel and even residential apartments.
A general trend in the office space segment is that businesses and other organisations now prefer suburban office as there is less traffic congestion and no expensive municipal parking space, among other factors.
And the CBD office space segment is expected to take a further hit from Covid-19 as work-from-home routines take hold.
“(The) company is pursuing possibilities of converting Harare CBD properties to alternative uses. The First Street and Nelson Mandela corner is the immediate target area,” said ZPI in its half year interims report.
“Technical investigations are advanced and commencement of works could be soon depending on viability profiles. The company intends to convert some of its CBD properties to alternative uses such as boutique hotel, residential apartments and student accommodation.
“A collaborative and syndicated development approach of the First Street and George Silundika Avenue block is also being pursued.”
Property consultants, Integrated Properties Research highlighted the growing weakness of the CBD office segment in the second quarter (2020) report:
“Defaults in the office sector have increased significantly with demand declining due to the underperforming economy. With the pandemic in effect, the office sector’s chances of recovery are blurry.
“The outbreak has put pressure on the office space market and rental growth as a result of low economic activity and reduced business activity.
Access to the Central Business Districts (CBD) was a challenge putting pressure on the performance of properties within the CBD highly affecting the sector.
“The sector’s occupancy level is estimated at 60 percent for the bulk of the office buildings in the CBD and this is projected to decrease as companies adopt technology for remote working and voluntarily surrender space surrender.”
ZPI said during the period under review — six months to June 30, 2020, its average portfolio vacancy rate marginally worsened to 23 percent from 22 percent, with Harare CBD office, Bulawayo CBD office and the Gweru industrial facility recorded the highest void rates.
Nonetheless, the group’s rental income was boosted by regular upward reviews and improved turnover rental on retail space.
“Month-on-month rent collection averaged 100 percent for the period under review, a decent performance considering the challenging operating environment,” said ZPI.
The group’s total revenue for the half year declined by 29 percent to $27, 06 million from $37, 96 million achieved in the first half of 2019.
Rental income grew by 27 percent to $24,21 million from $19,05 million attained in the corresponding period last year.