Buoyant property sector losses steam
Pauline Dikuelo | Friday December 19, 2014 09:03
While new developments continue to clutter the skyline of the Central Business District (CBD), rentals in secondary office market space such as Gaborone Main Mall and Commerce Park softened while the retail sector also approached saturation in 2014.
According to the 2014 International Property Databank (IPD) Report, the top-performing sector is the industrial property, followed by residential and retail industry. The industrial sector outperformed as a result of superior income return and a solid capital growth of 13.5%.
The report also showed that there was also an increase in rental rates, demand for large industrial sites and distribution centers. The residential market had an outstanding year, mainly in terms of capital growth and delivered a total return of 24.4%, although the income return of 4.1% was relatively low.
On the other hand, the office sector was the worst affected by oversupply with vacancy rates increasing from 1.9% to 5.9%. Rental growth was low at 4.3% and capital growth also underperformed at 5.6%. “The office market is showing signs of distress due to over supply as rentals have softened from an average of about P95, 00 per square metre to P75, 00 per square metre.” said property market expert Sethebe Manake.
The saturation in the retail market has also contributed to its low performance, as most of the buildings in the social centre of CDB are still vacant. Manake further asserted that after a long sustained bull-run, residential property prices have capped the market starting to rebase due to the improving availability and affordability of mortgages. She also urged people to invest in the residential market as it was rebasing and noted an increased demand for property ownership and low-income housing.
With huge demand still existing in the residential market, particularly the low income bracket, RDC properties announced that it would venture into residential property market by constructing some houses at an identified plot in Tlokweng.
“Industrial and residential development continue to yield impressive results with an increase of total returns of up to 21.4 percent for the year ended 2013,” said RDC group managing director Jacob Pari. RDC Properties are the owners of Masa Centre, Standard House, Real Estate Office Park and Chobe Marina Lodge.
Results of property giants Prime Time’s for period ended 31st August 2014, showed a 35 percent increase in investment property value from P544 million to P732 million, which they said had been the most contributing growth factor. They added that three new properties at a total cost of P149 million would bring Prime Time’s properties to 24. Its most notable achievement this year was the completion of the new Barclays headquarters.
PrimeTime currently owns three buildings at Prime Plaza, which include CEDA House, which was completed in August 2012. Marula House was completed at the end of November 2013. The latest addition is Barclays House, which was completed in August 2014.
Prime Time’s premium location is also said to have attracted an equal caliber of tenants with Cresta, Stockbrokers Botswana, SA Express Airlines and GIZ already in situ at Marula House.
Barclays Bank of Botswana has moved to its new home, the Barclays House. PrimeTime has also forged a further beneficial alliance with them by securing a large portion of the funding for this final building on the site. The latest Bank of Botswana financial statistics report show that since the beginning of 2012, property financing by commercial banks have grown by a phenomenal 150 percent to P6.9 billion.
In a period of sluggish economic and personal income growth, commercial banks in the year government also moved to repossess five plots in the new Central business (CBD) with hectarage totaling close to 50 thousand square metres for failure to develop commercial properties on the land within stipulated timeframes. As part of the CBD development, covenant plot owners are given at least two years to build or provide a plan, which proves financial and technical capacity for development.
According to a government notice published in September, the state forfeited land belonging to Estate Construction, M3 Consulting, Benedict Mabeo, Monatop, and Keboife Holdings. Most the plots were purchased in the period 2008 to 2009. Some of the buildings completed in the past few years include Exponential, iTowers, the Square, Masa Centre, FNBB’S First Place, Twin Towers, Morojwa and Mowana Mews, the High Court and the Prime Plaza. Developments were also forced by restrictive covenants placed on owners of CBD plots that require development within a set time frame thereby creating an artificial surge in office completions.
Office space stock in the Central Business district has risen by 800 percent in the past three years on the back of an aggressive construction boom by both speculative investors and pre-let and owner occupiers.