Low FDI spawns oversupply of industrial space

By | April 10, 2017

Source: Low FDI spawns oversupply of industrial space – NewsDay Zimbabwe April 10, 2017

LOW levels of foreign direct investment (FDI) have led to the oversupply and underutilisation of industrial space creating high vacancy rates in Zimbabwe, a new report has shown.

BY TATIRA ZWINOIRA

FDI project approvals took a dive in 2016 of over $1 billion from the previous year’s $3 billion. As such, investment into industry has remained minimal.

According to Knight Frank’s 2017 Africa Report, the continued decline of the Zimbabwean economy has led to several manufacturing companies closing operations.

“Very little foreign direct investment has come into the country as a result of the government’s indigenisation policies, the high cost of capital and socio-political instability. This has led to an oversupply and underutilisation of industrial space. The sector is therefore characterised by high vacancy rates, declining rents and the voluntary surrender of leased space by tenants,” the report read.

“A number of investors in this sector are looking to disinvest, but there is little or no demand except from a few owner-occupiers.”

It said Zimbabwe’s continued low economic activity with the current liquidity challenges have stagnated uptake of industrial space and office market activity.

As such, supply was higher than demand with research by Knight Frank suggesting that tenants were voluntarily surrendering space.

Despite the implementation of several import restrictions, namely, Statutory Instrument 6 and 126 of 2014, SI 18, 19, 20 and 64 of 2016 only 10% of manufacturers were able to fully capacitate.

In terms of office space, buildings in the Harare’s central business district (CBD) now have void rates of between 50% and 90%, which is warding off investments.

“Suburban offices have become more sought-after investments, due to their lower void rates, but there continue to be few sales transactions,” the report read.

“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.”

For residential market transactions, mortgage finance meant to assist buyers are being slowed down by the lack of growing liquidity, Knight Frank said.

“Most transactions are therefore on a cash basis, and the majority of the population does not have the necessary funds to be able to buy property. Low disposable incomes and poor liquidity have depressed rental levels,” it said.

Knight Frank is a global British residential and commercial property consultancy firm.

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