Zim property sector battles default stress

BUSINESS REPORTER

Zimbabwe’s property is deeply concerned about rising defaults on lease obligations, Business Times can report.

In a statement accompanying the company’s financial results, First Mutual Property board chairman, Elisha Moyo said defaults were giving players in the sector a serious headache.

“The industry grappled with “twin evils” of rising defaults on lease obligations and construction cost inflation,” Moyo said.

He said management “continues to closely manage these risks given their potentially huge impact on the company’s strategy”.

Moyo said the property market fundamentals were mixed during the period under review.

The leasing market for commercial space was the most active segment, with buoyant activity in the retail and industrial sectors, he said. However, the office segment was subdued because of the need by people to re-adjust their newly-formed working habits of “working from home” to “back to the office”, Moyo said.

“The central business district office experienced the highest vacancy rates forcing most owners to remodel their properties to cater for the Small and Medium Enterprises sector. Further, the retail, industrial and residential sectors enjoyed relatively huge activity during the year,” he said, adding that in contrast, commercial property transactions were low due to huge investment requirements.

“Limited commercial property developments seen during the period under review have largely been self-funded, and are being used as a hedge against currency and inflation risks as well as possible future rental increases.”

Moyo said the company will continue to closely monitor the business environment and adapted strategies to protect the business from the exogenous shocks as demonstrated by the performance achieved during 2022.

“The company remains focused on delivering on its strategy despite the environmental uncertainty caused by the global geopolitical tensions as well as a volatile and complex economic environment.

“This involves developing a sustainable and well-diversified business portfolio, delivering on new projects within budget, schedule, and acceptable quality as well as creating value for all our stakeholders,” Moyo said.

He said the group is pursuing various projects.

“The group is in the early construction stages of a new office block in Arundel Office Park. The contractor is already on site and was working on pile foundations in the basement at the end of the year. The project is expected to be completed by December 2023.

“Following the successful completion of the construction of the Mbare retail warehouse, the premises were handed over to the tenant (Gain Cash and Carry) during the year. The tenant started operations in July 2022,” Moyo said.

“Various projects to provide university students accommodation are being pursued.

At this stage, the most advanced one involves constructing a 430-bed facility in Chinhoyi, which started in October 2022.”

First Mutual Properties is a co-investor and project manager in the project with other pension funds. The project is expected to be completed in November 2023.

Moyo said the leasing market for commercial space was the most active segment, with buoyant activity in the retail and industrial sectors.

However, the office segment was subdued because of the need by people to re-adjust their newly-formed working habits of “working from home” to “back to the office”.

The CBD office experienced the highest vacancy rates forcing most owners to remodel their properties to cater to the Small and Medium Enterprises (SMEs) sector.

Moyo said the retail, industrial, and residential sectors enjoyed relatively huge activity during the year, and in contrast, commercial property transactions were low due to huge investment requirements.

Limited commercial property developments seen during the period under review have largely been self-funded and were being used as a hedge against currency and inflation risks as well as possible future rental increases.

“Collections decreased to 72% from 82% in the prior year, particularly on the back of the country’s contractionary policies,” he said.

FMP profit after tax, however, went up 58% to ZWL$31.5bn in 2022 from ZWL$19.9bn.

Revenue for the group rose 42% to ZWL$2.9bn in 2022 from ZWL$2.04bn in 2021.