In the past it was not bankable and feasible to take property development projects to the outskirts of major towns and cities considered as economic hubs. This did not fare very well in terms of developmental opportunities. However the dynamics of real estate development have since changed as evidenced by the increasing number of shopping malls being established on the peripherals.
Last week Thursday at the Afena Botswana Press Club, Property practitioner and GFi Property Group Director, Bakang Palai, engaged business journalists to discuss the future of real estate in Botswana. With an extensive involvement in various property development projects, Palai demonstrated thought leadership in the country’s real estate landscape. The projects he has worked on include Airport Junction Shopping Mall, Virgin Active and Turn star Building Refurbishment to mention but a few. Palai explained that the fundamental of real estate is property development. He then went on to describe the current conditions of the various sectors of the property market.
He depicted the office market to be in a state of oversupply which has significantly put pressure on rentals. Using the Central Business District (CBD) as an example, he explained that the high vacancy rate of the office market has put tenants in a position where they now dictate where they want to be and how much rent they want pay. This scenario has been described by other practitioners in the industry as a ‘buyer and tenant’ market, which simply means that their knack to negotiate overrides that of the seller and landlord. He added that the office market is currently in its infancy and is largely driven by government and parastatals.
In terms of the retail market, Palai advised that developers have ‘to tread with caution’ on the basis that real estate development is driven by the availability of tenants. This means that before construction can take place developers should first have secured tenants. He also observed the movement of shopping centres to the outskirts, which is indicative of the available demand. A rather salient observation Palai made regarding the historical makeup of stores in the outskirts is their segmented nature. In the past although a village would have a general dealer, butchery and bottle store as standalones, it is evident that consumers today now want an organised and convenient shopping experience. With regard to the residential market, he highlighted the demand at the lower end of housing presents a challenge to developers to build houses that people can afford based on the current lending rate at banks. He added that there is also an emerging demand for student accommodation but developers however are yet to unpack the opportunity.
Palai also pointed out that developers are still faced with numerous challenges, which include access to funding, lack of serviced land and delays at Council for plan submissions. On the subject of serviced land, Palai projected availability in the future by explaining that the challenge is further compounded as development moves into the outskirts. The segmented nature of shops in such places, he highlighted, makes it difficult to develop particularly in cases where the shops are randomly situated. “If serviced land was available it would coordinate their (shops) organisation,” he said.
Palai suggested a new thinking and interaction around the real estate industry so as to move it forward.
He proposed on the one hand that the private sector should start getting involved in terms of delivering infrastructure, and on the other that government should support local developers, emphasising that such support should be granted on merit and credibility. He explained to Sunday Standard that this entails proving delivery with a track record that stipulates factors such as delivery time, quality and cost. “We can’t be expected to be supported and not deliver but there should be opportunities for those who deliver,” he said.