Vendors, high rentals drive companies out of CBD

THERE is a growing trend in Harare where an increasing number of companies is seeking to buy or rent property in residential areas on the periphery of the central business district (CBD), a property expert has said.

Responding to questions from Standardbusiness on the development, Washington Musiiwa said the trend had been going on for quite some time now and he attributed it to the low property prices and rentals in suburban areas.

"It is indeed true that most businesses are now either buying or renting for official business in houses close to the CBD, notably Belvedere, Eastlea, Newlands, Alex Park, Kensington, Avondale, Milton Park, Hillside, Belgravia, Avenues, Borrowdale, among other areas. The trend has been on-going for some time now and at a fast rate. Given a choice, the majority of companies would rather rent a house outside CBD," he said.

"The only companies that would prefer to remain at the heart of the CBD are those whose day-to-day business deals with a very high number of traffic/customers, or employ a large number of people, or who by virtue of their target market, must remain in CBDs. However, some maintain a presence within the CBD while strategically opening other branches in houses in those suburbs. The absence of good office parks in the country has also compounded the situation."

He said the type of companies now occupying these houses was quite varied as most firms that dealt with a target market preferred renting or acquiring houses in those areas.

"Companies range from law firms, brokers, non-governmental organisations to administrative offices and company headquarters, among others. Companies mostly prefer these houses for various reasons. Houses are generally cheaper than offices. Houses usually offer enough ‘free' parking for both workers and visitors. Privacy and a tranquil environment is also guaranteed," Musiiwa said.

"Businesses like to rent in a house with commercial rights, because that what's legit. Such properties with commercial rights actually sell for more and companies can rent for more as compared to residential dwellings where families lodge. Any company that operates offices at a house without commercial rights does so illegally."

The growing number of street vendors together with the high rentals in the CBD has made it unattractive for companies to remain in the cith centre.

Property analysts said this trend of companies moving to the city outskirts could only mean good times for home owners in those areas who were struggling to get tenants on the back of decreased incomes and high unemployment.

However, while homeowners are gaining, firms who own CBD property are losing clients.

Currently, the CBD has many offices that are not occupied because of this growing trend of companies moving to the suburban space.

According to the United Kingdom-based real estate agency Knight Frank's Africa Report 2017/18, the economic and liquidity challenges had stagnated office market activity in the CBD.

"Zimbabwe is suffering from economic and liquidity challenges which have stagnated office market activity. Supply is higher than demand and tenants are voluntarily surrendering space. Office buildings in the Harare CBD have void rates in excess of 50%, making them unattractive investments. Suburban offices have become more sought-after investments due to their lower void rates, but there continue to be few sales transactions," Knight Frank said.

"To reduce vacancy levels, some CBD landlords are converting office space to shops, while others are partitioning floors into smaller suites. Given the challenging market, no new multi-storey buildings have been constructed in the last 20 years."

In the Zimre Property Investments Limited (ZPIL) half-year report ended June 30, 2017, chairman Jean Maguranyanga said the property sector had seen declining rental revenues as well as increasing debtors and voids leading to reduced demand for CBD offices and industrial space.

ZPIL owns a number of buildings in the CBD.