Mmegi Online :: Pressure mounts on office property market
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Last Updated
Monday 17 December 2018, 16:18 pm.
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Pressure mounts on office property market

The pressure on Gaboroneís office property market is seen tightening this year as the coming on stream of new buildings will further weaken demand for secondary space.
By Staff Writer Wed 24 May 2017, 18:00 pm (GMT +2)
Mmegi Online :: Pressure mounts on office property market








According to a report compiled by real estate experts, Knight Frank, office supply continues to outstrip demand in Gaborone and this imbalance is likely to worsen for secondary space this year.

“With several large CBD office towers due for completion in 2017 and government departments set on moving to new CBD buildings, older and poorly located offices will be left empty with little expectation that they will be taken up by the private sector. “Fairgrounds Office Park remains the decentralised location of choice, 
with rents around 20% lower than in the CBD,” reads the Knight Frank Africa 2017 report.

Knight Frank however said despite the perceived oversupply, several occupiers with requirements for between 500 and 1,000 square metres are unable to secure appropriate accommodation in the new CBD buildings, and many high-rise towers with smaller floor plates do not suit corporate occupiers.

The International Property Database (IPD) 2016 report on Botswana shows returns on the office space market slowed to 8.1% from as high as 18% in 2012.

There are reports of increasing vacancy rate at Commerce Park, government enclave and Gaborone International Finance Park and the surrounding office premises.

The sluggish economy has also exacerbated the situation for the market as the capacity for tenants to pay higher rentals has been constricted.

Bank of Botswana data shows that lower mortgage uptake helped push year-on-year growth in commercial bank credit decelerated from 7.1% in 2015 to 6.2% in 2016, against a background of subdued economic activity and restrained growth in personal incomes.

The slowdown in annual credit expansion was mostly associated with the decrease in growth in lending to the household sector from 12.8% in 2015 to 7.6% in 2016.

By component of household credit, annual growth of unsecured lending decreased from 15.5% in

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2015 to 8.3% in 2016, while yearly expansion in mortgage loans declined from 7.2% to 6.3%. 

In the 2016 annual report released recently, the central bank said the moderation of mortgage credit growth in the context of a slowdown in the property market bodes well for maintaining potential risks in this area at modest levels. 

The state of the economy has also affected the residential market where demand for high-end properties has severally diminished while low to medium housing is in low supply.

Gaborone has a diminishing supply of low-to-middle income housing, with most people on average incomes finding it difficult to locate affordable housing or finance their own self-build homes.

“The drift to smaller and cheaper properties has been reinforced by an increased number of single-family households due to growing student and elderly populations. Many residential buy-to- let investors are struggling to find tenants, particularly as expatriate workers have found it difficult to renew work permits. Sales at the high end of the market are far less frequent and likely to stay muted for some time, states the report.

While the growth of office and residential market appears to be moderating, Knight Franks says the industrial property market seem to be stable with the demand for industrial space focused on units of less than 500 square metres, as tenants have started to use newly built business space as cheaper quasi-offices or showrooms.

“The lack of strict planning controls within industrial areas has enabled this trend. For new warehouses under 200 square metres, rents are now as high as 50 pula/square metre a month, close to half the level of fully-fledged offices. Demand for larger space is dominated by quasi-retailers seeking prominent properties with good visitor parking,” said Knight Frank.

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