Property & Infrastructure

Covid-19 hits property sector

TAURAI MANGUDHLA


The property market woes have been worsened by the Covid-19
pandemic which has hit collections and rocked the boat with the
future remaining uncertain for the industry, players say.


Currently suffering from a currency crisis that has made
pricing of the product difficult and hit hard on tenants’ pockets, the
sector has not been spared by the economic slowdown and growing
informalisation.


Pressure is mounting on players to diversify income streams.
The Covid-19 pandemic saw some businesses deemed to be nonessential shutting down and the essential ones operating at below capacity, adding to the woes of the property sector.


Zimbabwe Stock Exchangelisted property firm Mashonaland
Holdings said the lockdown,
introduced effective March 30 and was last week extended indefinitely
with periodic reviews prevented over 70% of the group’s tenants
from being physically present in the leased premises as they were
classified non-essential.


Mashonaland Holdings recorded a drop in collection levels for April
2020, which closed at 70% down from an average of 95%.
“The group has also engaged all its service providers and reduced levels
of service in line with requirements, without compromising quality, to
reduce building operating costs during these difficult times,” Mashonaland Holdings said in a trading update for the second quarter ended March 31, adding the forecast assessment of solvency for the quarter showed reduced
insolvency risk under the worst-case scenario.


To adapt, Mashonaland Holdings commenced with its business
continuity plan, with all essential services working offsite.
It said the operating environment is likely to remain challenging in the
short to medium-term.


“In light of the surging inflation, the company will continue to
explore opportunities to preserve shareholder value primarily through
the implementation of preleased developments and revitalisation of
existing buildings to ensure futurefit,” the group.


“Despite the development sub-market becoming riskier, the company will put in place measures to enable implementation of some of its construction projects.”
In the period under review, Mashonaland Holding’s rental income went up 40% to ZWL$20.1m compared to the same period last year while occupancy
level grew 3% to 79.2%.


Another listed property company First Mutual Properties (FMP) warned demand for real estate products will be hit by an uncertain economic outlook due to climate change, power supply, foreign currency challenges, low productive sector capacity utilisation and the further potential adverse effects of Covid-19.


“These factors have ramifications for the country’s recovery prospects
and will affect demand for various real estate products,” said FMP in
its annual results.


FMP said it will continue to pursue and implement various strategies to preserve shareholder value and position the group for growth with a focus in the short term on driving rental growth, managing operating and maintenance costs to ensure the going concern and sustainability of the property portfolio.


“With changing local and global and real estate trends, the group
will target investment opportunities in non-traditional real estate
asset classes and provide property services to third parties to further
diversify income streams,” FMP said, adding the group will also
focus on developing new products and tailoring existing stock to the
changing requirements.


While FMP believes the depth and breadth of the economic impact
of Covid-19 on the real estate sector remains uncertain, it acknowledges
that long term behavioural changes will define market direction, as
immediate reactions and changes may not be long term.


“The ability to ensure real estate products are agile and adaptable
is critical. The focus for property investors will be on determining
the right balance between capital preservation and further
strengthening the competitive differentiation of existing products,”
FMP said.


“Covid-19 has accelerated the need to diversify revenue streams,
pursuing digital strategies, and focusing on enhancing tenant
experience with owners and operators collaborating to protect
their ecosystem to remain a going concern.”


In the period under review, FMP’s rental income decreased by
12% to ZWL$58.10m compared to the same period in the prior year,
underpinned by foreign currency translations effect. In line with a
drop in revenues, property expenses also slid by 11% while net property
income also marginally decreased by 13%.


The sentiments come after Zimre Property Investments Limited (ZPI)
obtained a waiver to charge for some of its services in hard currencies.
ZPI noted that there was reconfiguration of existing rental
space for other uses in line with market demand and move towards
turnover based leases.


It said the rental income declined in real terms translating into
weakened property values in real terms due to the hyperinflationary
conditions and the depreciating local currency.

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