Property market outside Gaborone struggling - report

Boitshepo Majube | Friday January 17, 2014 16:40

The company says that small civil servants salary increases has resulted in reduced disposable incomes in the region. PrimeTime managing director, Sandy Kelly said they see this trend continuing for some time. 'Francistown is battling. Whilst our properties are performing satisfactorily, we struggled with some vacancies and bad debts there,' he said.

He pointed out that rearrangement of some tenancies has finally filled Nswazwi Mall's upper level and currently they have a few vacancies in Blue Jacket Square, but there is not much rental uplift in those properties. 'Nswazwi Mall remains a very strong trading position for retailers,' he said.

He added that Boiteko Junction in Serowe and Hillside Shopping Centre in Lobatse continue to perform steadily with minimal tenant turnover, but limited income growth; largely as a result of the tough economic conditions prevalent in outlying towns.

In Gaborone, Kelly stated that large retail centres are probably over traded with the shopping public now spoilt for choice. 'They can go to any number of Game City, Rail Park Mall, Riverwalk and Airport Junction,' Kelly said. He warned that the result might be that the tenants are not able to sustain rentals and pressure may come on landlords down the line.

Kelly said many see a possible over-supply in the new Gaborone CBD as a number of buildings are coming up, more as a result of pressure to develop or forfeit plots to government. 'However, two of the three large buildings along the eastern boundary have all been let to government departments, who have previously been out of the market for the last 4-5 years,' Kelly said. He added that tenancy for the third building is under negotiation with government.

Other property industry players have stated that migration of businesses to the new CBD from the Main Mall/Government Enclave and Kgale is putting pressure on rentals as vacancies emerge. They also note that older properties are likely to suffer in the short and medium term as tenants upgrade to new and better developed facilities.

Despite cries that the property market outside Gaborone is struggling, investors raked in returns as high as 17.9% last year - more than double the average inflation rate. This buttresses the sector's position as the most lucrative investment in Botswana, a report by international property market experts, Investment Property Databank (IPD) shows.

The IPD report states that property has remained the only investment choice with significant inflation beating returns buoyed by mostly the retail and residential sectors, which recorded returns as high as 16.6% and 24.4% respectively in the year 2012. According to the report, the industrial sector was the most profitable in 2012 with returns of 28.4% reflecting high demand for such properties in an economy that is pushing hard to prop up the private sector under the economic diversification drive. The residential sector was the second most profitable with a yield of 24.4% up from 20.6% in 2011.

According to a 2012 Knight Frank report, landlords in the secondary markets have cut asking rents in order to secure tenants. They have offered flexible lease terms rather than see their properties sit empty, as the market appeared deluged by new facilities.