It appears tables have turned in Zimbabwe’s property sector where the tenant has suddenly become more powerful than the landlord because of an environment where too many properties now chase very few tenants.
BY TARISAI MANDIZHA
Various factors have led to the situation where accommodation has outstripped demand, among which is the prevailing liquidity crunch and the general economic difficulty the country is facing.
The economic challenges have resulted in the closure of many companies and the sudden glut in both office and residential accommodation.
There has been a huge movement of tenants from their rented premises to cheaper places, or for others that may have closed shop or lost jobs, relocating as they go out of business.
Real Estate Institute of Zimbabwe president Siza Masuku said while traditionally landlords had the final say on leasing matters, the current liquidity crunch in the market had necessitated the need for greater flexibility in their relationships with tenants.
“Some property players are offering rent-free holidays and complimentary parking as a way of attracting tenants in commercial properties.
“Other property players are offering discounts of between 10 to 20%, off the market rate,” Masuku said.
He said reducing rentals was purely a business decision by the real estate players with the objective of retaining occupancies in their property portfolios.
“This is also attributed to the fact that we now have a tenant’s market whereby they have a variety of options to consider for their occupancy needs, due to the high rate of vacancies in the market,” Masuku said.
He, however, said most property players had experienced a decline in their ability to collect rent and operating costs timeously.
“This has had an effect of a high default rate by tenants. Some have entered into payment plans or deed of settlements as a way of meeting their lease contractual obligations,” Masuku said.
“However, due to the deflationary economic pressure affecting the economy, coupled with the liquidity crunch, some tenants are also defaulting on these payment plans, resulting in their evictions.
“The above has had an effect of reducing the collecting levels of rent income by property players to around 70 to 80%.”
Until the new developments, landlords had always called the shots, with tenants at the receiving end.
However, the sprouting up of co-operatives has given tenants the opportunity to become landlords, meaning that many have moved out of lodgings to their own small properties.
A landlord in Harare’s Kensington suburb, Charles Nyabango told Standardbusiness last week that the obtaining economic environment had seen a number of landlords living alone on their properties because many people had moved to new residential places where it is cheaper.
This, he said, had forced landlords to reduce rentals.
“At the moment, there are so many houses and if you trouble your tenants, they will go,” he said.
“Times are difficult and people are looking for places which are cheap.
“People no longer care about such luxuries as electricity and will just move to their own places where they do not have to pay any rent.”
A tenant from Mabvuku, Blessed Tafara, said there were now many empty houses in the suburb as former lodgers moved to their own places at nearby Caledonia farm or had found new lodgings at the new settlement where rentals are as little as $10 per room.
Masuku said retail space of up to 100 square metres in size was now fetching rent of between $15 to $20 per square metre, depending on the location of the building.
He said that was the reason why there was now a proliferation of little subdivisions inside shops where many different “shops” emerged out of a single room.
Commenting on the occupancy levels, Masuku said there was no supporting research, but informal enquiries indicated that the industrial sector was the hardest hit, with voids reaching 60%, followed by the office sector, especially in the central business districts, with voids of up to 40%.
Masuku warned that the property sector would remain depressed if the current liquidity crunch in the economy persisted.
“Some players have already started streamlining or restructuring their property portfolios as a way of remaining relevant in the market,” he said.
“Other strategies adopted by some players include disposal of their non-performing assets or space re-configuration, according to market dictates.”