Saturday, December 2, 2023

Property findings paint bleak picture

“Land ownership is the single most powerful pathway to opportunity.” As established by the World Economic Forum, it is also the foundation to the development of real estate markets, which according to 2017 Africa Report by Knight Frank real estate activities take place on a continent poised for growth and opportunity. 

Knight Frank provides residential and commercial property consultancy with 335 offices across the world including Africa.    

The report zooms into 30 African countries, including Botswana, and for each country gives insight of the property market across its major segments. This includes the office, industrial, retail and residential markets. An overall picture drawn from the segmented description gives a state of a market that appears to be transitioning. This is due to recent changes that have been observed in the market which spells new dynamics to it. 

Starting with the office market the report found that office supply continues to outstrip demand in Gaborone and this imbalance is likely to worsen for the secondary space. 

“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,” cites the report. 

Despite this growing attraction to CBD it is said that several other occupiers struggle to secure the right fit for their workspaces. An example is given that many high rise towers come with smaller floor space which is inappropriate to corporate occupiers. Fairgrounds Office Park proved to be popular as its rents are said to be 20 percent lower than those in the CBD.    

The retail market experienced turbulence when the licensing conflict between local and foreign retailers played out in the open with government involved in the tussle as the referee. Government in this instance leaned towards the side of local retailers. 

The report notes that demand for space in this market is falling and attributed this decline to weak consumer spending. “Historically, mall developers have targeted South African chains, who were able to obtain exemptions to legislation that limits the granting of certain trading licenses to local businesses. 

“However, a hardening of the government’s stance meant that South African retailers were unable to obtain exemptions throughout 2016,” notes the report. Should the decision by government stick the report posits that the development of new malls will be stifled. In addition, landlords will only have Botswana based tenants to attract but the downside is that they generally occupy smaller shops of less than 200 sq m. The industrial market is also facing uncertainty due to leases nearing expiration. With Botswana reaching 50 years of independence in 2016, many 50-year Fixed Period State Grant (FPSG) leases are nearing expiration and industrial property owners are anxious to see how the state treats requests to renew FPSG leases,” says the report. 

The residential market does not fare any better to the other markets as the report highlights that Gaborone being the economic hub is experiencing a diminishing supply of low to middle income housing hence majority of people on average income falling short to securing affordable housing let alone financing 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,” says the report. On the other hand, the top end of the residential market is said to have far less frequent sales and is likely to maintain that trend for some time. 

While Africa is positioned for opportunities and growth, the report advises investors to garner detailed understanding of the individual markets and to also make entry at the right time.


Read this week's paper