CBDs struggle as suburbs gain traction

Zimbabwe's property market is grappling with a complex mix of economic pressures and changing tenant preferences, according to a recent report by Knight Frank.

Vacancy rates in prime urban areas are alarmingly high, with Harare's Central Business District (CBD) seeing 60 percent vacancy and Bulawayo's CBD at 40 percent. The oversupply is compounded by ageing infrastructure, rising crime, and costly parking options. The Safeguard Crime Report 2024 highlighted a 13 percent increase in crime within CBDs from late 2023 to mid-2024, intensifying tenant concerns.

Parking fees further discourage tenants and customers from CBDs, with casual parking averaging US$1 per hour, compared to free parking in most suburban areas.

This has triggered a significant relocation trend. Knight Frank notes that 30 percent of businesses in Bulawayo's CBD have moved to suburban districts like Suburbs and Khumalo between the second half of 2020 and 2024. Similarly, in Harare, major banks have shifted or are planning to move their headquarters to northern suburbs such as Highlands, Newlands, and Borrowdale.

Traffic congestion adds to the woes, with Harare CBD experiencing a 30 percent increase in congestion, which frustrates tenants and customers alike. Rental economics also favor suburban areas, where rents average US$10 per square metre—substantially higher than the US$6 per square metre seen in CBDs. Coupled with free parking in suburbs, this makes suburban locations more attractive for businesses.

Mortgage finance remains largely absent due to prohibitively high borrowing costs. Knight Frank reports that no mortgages are currently extended for real estate purchases, pushing the residential market to rely heavily on cash sales fueled by diaspora remittances and small-scale miners.

Current residential property prices in Harare range from US$60,000 to US$80,000 for high-density units, US$120,000 to US$250,000 for medium-density, and around US$500,000 for low-density homes. This trend underscores the dominance of cash buyers, mainly overseas Zimbabweans and artisanal miners.

The retail sector is also undergoing decentralisation. Large department stores have closed or been converted into micro shops catering to small and medium enterprises (SMEs). Knight Frank observes that supermarkets and hardware stores remain the main "large box" retailers, while smaller retail units—some as small as 9 sqm—are leased on short-term contracts.

Retail leases typically combine a basic rent with turnover rent, averaging around 2 percent, but revenue is heavily dependent on the Zimbabwe Gold currency (ZiG), with an estimated 90:10 ZiG to US dollar split among national retailers.

Rental rates vary by location, with secondary towns commanding US$20–30 per square metre monthly, while Harare's CBD can reach up to US$50 per square metre. However, high turnover rates of about 40 percent annually reflect the competitive and challenging retail environment in prime locations.

In the industrial sector, rental yields have slightly improved, averaging 13 percent compared to 11 percent in late 2023. Growth prospects hinge on increased activity in agriculture and mining, sectors that will drive demand for warehouses and logistics space.

Financing remains a significant challenge, with mortgage yields at 5.84 percent and construction project financing at a mere 1.17 percent. This scarcity of capital reinforces the cash-driven nature of the property market.

Knight Frank's report paints a clear picture: security concerns, economic realities, and shifting tenant needs are reshaping Zimbabwe's real estate landscape. Office landlords are finding relief in suburban and northern precincts, residential developers must cater to cash buyers, and retail landlords need to embrace flexible, SME-friendly spaces.

Industrial investors should closely watch primary sector trends for yield improvements.

As the year progresses, those aligning their strategies with these market insights—prioritizing safety, accessibility, and currency diversification—will be best placed to navigate risks and seize emerging opportunities in Zimbabwe's evolving property market.