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Longcheng Plaza, a shopping mall built by a ChineseZimbabwean joint venture for an estimated cost of US$84 million, was opened in December 2013.

TWO of the country’s largest property investments in 2014 added an extra 26 000 square metres of office space onto the market, according to a report by property market giant, Knight Frank.

But the facilities, built in Harare at costs running into several millions of dollars, have remained unlet as a result of low demand in Zimbabwe, the report noted.

In its 2015 Africa report released recently, Knight Frank said the economic crisis in Zimbabwe, which had caused the closure of many companies and affected people’s capacity to pay for rentals and access mortgage finance to build houses, had triggered subdued growth in the property market sector and hammered rates.

Property market firms have been finding the going tough, and many are remodeling their businesses in line with the dynamic environment dominated by a liquidity crisis.

“The weakening of the Zimbabwean economy has led to poor office take up in Harare and high void rates, in excess of 30 percent,” said Knight Frank, whose report analysed the property market across Africa.

“The recently completed Old Mutual and Celestial office parks along Borrowdale Road (in Harare) have delivered 26 000 square metres of office space which remains largely unlet,” the report said.

“Office rents have stagnated, as occupiers have struggled to meet rent and service charge costs, and are currently in the region of US$8-10 per sq m per month,” it added.

“Longcheng Plaza, a shopping mall built by a ChineseZimbabwean joint venture for an estimated cost of US$84 million, opened in December 2013. However, the proposed US$100 million Mall of Zimbabwe in Borrowdale has experienced delays to its construction. Retail space is in high demand, as a number of foreign brands are making inroads into Zimbabwe, including the South African retailers Pick n Pay and Mugg amp Bean, Botswana supermarket chain Choppies and international fast food giant KFC. Prime retail rents are around US$25 per square metre per month. There is a trend for some landlords to redesign and reconfigure their existing space, to create smaller retail units,” said Knight Frank.

It added that Zimbabwe’s manufacturing capacity utilisation, an indication of how much of industries’ installed capacities is being utilised, had declined to below 40 percent.

At the same time, a number of manufacturing companies have closed and affected the production of goods and services.

This has also affected the capacity of industries to take up space in industrial estates, leading to the supply of industrial space exceeding demand. Rentals in industrial estates have softened.

“As a result of the depressed economic activity and high cost of capital, investment in the sector has been low,” said Knight Frank in reference to the industrial property market.

The report said residential properties had been affected by the absence of long-term mortgage finance and poor liquidity.

In Zimbabwe, banks have been failing to offer mortgage finance to people requiring funding to build or purchase houses as a result of the liqudity crisis sweeping across the financial system.

And due to the high level of non performaing loans, the few available funding has been offered at high premiums, or under strict terms that have disqualified many of the people looking for mortages and other forms of finance.

Knight Frank said mortage rates on the market were out of the reach of many.

“Expensive mortgages are offered on a selective basis, typically for 10-20 years at rates between 15-18 percent,” the report said.

“This is unaffordable to most Zimbabweans. House prices and residential rents are falling as a result of the weak demand and low disposal incomes,” it added.

Source : Financial Gazette