Bulawayo businesses flee CBD to suburbs

Real estate consultancy firm Knight Frank Zimbabwe has revealed that aging and poorly maintained infrastructure is a key factor behind the soaring vacancy rates in Bulawayo, which have reached a staggering 40 percent. The report, released by the firm, also highlights a significant shift in business activity, with many companies relocating from the central business districts (CBDs) to suburban areas in both Bulawayo and Harare.

According to Knight Frank, 30 percent of businesses that were previously located in Bulawayo's CBD have moved to suburban areas such as Suburbs and Khumalo between the second half of 2020 and the second half of 2024. This trend mirrors a similar situation in Harare, where major banks are either relocating or constructing new head offices in northern suburbs like Highlands, Newlands, and Borrowdale.

A combination of factors such as traffic congestion, high rental rates, and deteriorating infrastructure has prompted tenants to seek more convenient and affordable spaces outside the city centers.

"Increasingly, businesses are moving out of the CBDs due to the challenges posed by traffic congestion and the steep rental rates in central areas. These issues have been compounded by aging infrastructure and a lack of investment in maintenance," said the report.

The vacancy rate in Harare's CBD has also reached a concerning 60 percent, signaling a significant decline in demand for office spaces in the heart of the capital. Knight Frank's report also highlighted that the quality of tenants in urban CBDs has worsened in recent years, largely due to the informalisation of the market, further driving down rental values in these areas.

"The informalisation of the market has contributed to a reduction in the quality of tenants occupying CBD spaces. As a result, rental prices have declined, with only a few prime locations and high-quality assets maintaining their premium rental values," the report stated.

Additional factors contributing to the high vacancy rates include a reported 13 percent increase in crime within the CBDs between the second half of 2023 and 2024, and the limited availability of affordable parking. With casual parking costs averaging US$1.00 per hour in the CBD, compared to free parking in many suburban locations, businesses are increasingly looking to relocate to more accessible and cost-effective areas.

The report also noted that "passive voids," or vacant spaces with little to no prospect of being leased, have become a growing issue in both the industrial and office sectors. This phenomenon has contributed to a structural shift in the market, as investors face significant financial losses due to fixed operating costs such as deferred maintenance, municipal rates, taxes, insurance, and security.

As vacancy rates continue to rise, Knight Frank highlighted the need for investment in infrastructure upgrades and improved urban planning to address the challenges faced by businesses operating in Zimbabwe's urban centers. The firm also emphasized the importance of creating more attractive and functional spaces in the CBDs to entice tenants back to these prime locations.

In conclusion, the report serves as a warning to property owners and investors in both Harare and Bulawayo, urging them to adapt to changing market dynamics or face further losses in the face of escalating vacancies and declining rental values.