Companies desert CBD office space - Pearl Properties

Property development company, Pearl Properties has said demand for space in the industrialised and central business districts still remains weak due to widespread company closures.

In its audited financial statement for the year ending December 2014, the property firm said the sector was hit by high rate of defaults, stagnating or declining occupancy rates and an increase in in the number of legal evictions.

It also said voluntary office space surrenders was high in the process negatively affecting upward rent reviews.

"Demand for space in the specialised industrial and central business district (CBD) office sector remained weak with the CBD offices worst affected. This weak demand for space was also a result of company closures and retrenchments that resulted in voluntary space surrenders by tenants.

"However demand for retail space remained relatively strong. The effective demand in the economy affected tenant revenues resulting in high defaults as tenants struggled to meet rent and operating costs obligations," said Pearl Properties.

The firm said revenue during the period under review declined by 2,71% to $8,778 million  driven by a decline in rental income.

Rental income declined by 3,4% to $8,700 million driven by a downward movement of the average rental per square metre to an average of $7,57 million.

Property expenses excluding provision of credit losses increased by 16.10% to 41.103 million also driven by expenses relating to vacant space.

Provision for credit losses expenses increased to $1,215 million reflecting the increasing tenant default rate.