Rentals nightmare as inflation bites

HARARE – Property owners say rental collections is giving them headaches as inflationary pressures and exchange rate volatility are putting pressure on tenants’ ability to meet their obligations timeously.

This comes as tenants especially in the Central Business District (CBD) space are also battling the same challenging economic environment with some landlords pegging rentals in US dollars to hedge against inflation.

Like any other sectors of the economy, the real estate sector has also felt the pressure caused by inflation and currency volatility, the adverse impacts of the Covid 19 pandemic and the unrest in Eastern Europe.

Mashonaland Holdings Limited head of property management, Progress Kamonere, revealed that as property owners, collecting rentals from tenants was now a mammoth task and they were forced to review them on a frequent basis in line with the obtaining exchange rate movement.

“We are facing a lot of challenges collecting rentals from our tenants. It is difficult to peg rentals in local currency due to the fluctuations in exchange rate, so we have to review rentals constantly.

“Charging in US dollar is also difficult for our tenants because they are also operating in the same challenging environment. As a result, we have to constantly engage and meet half way with our tenants,” she said during the ZimReal Property Investment Forum held in Harare yesterday.

She added landlords now have a double burden — juggling between rental collections and becoming tax collectors from their tenants, mostly the small to medium enterprises (SMEs) who now occupy the CBD buildings which have been repartitioned to cater for the growing informal sector.

As the economy struggled with the adverse impacts of the Covid 19 pandemic with limited formal employment, many Zimbabweans turned to informality, starting their own enterprises.

This pushed demand for retail space with property owners partitioning their buildings into smaller spaces to cater for the upcoming small to medium enterprises.

Organisations such as Meikles Limited have already partitioned some their buildings in Harare’s central business district that were once occupied by the now closed Barbours.

While there is high demand from the SME sector, this comes with its own headaches.

“We have a double job, getting our rentals as well as collecting presumptive taxes which is a huge challenge as they don’t have tax clearances,” she said.

Despite the challenges, smaller units for SMEs, according to Sithembinkosi Mbavhumana partner Knight Frank Southern Region presents good returns as well as removes the challenges of subletting of space, which shortchanges the property owners.

“One of the problems we face is subletting which shortchanges owners, but when you divide into smaller units, you do away with such challenges,” he said.

Overall, CBD office space has remained sluggish in the past decade as businesses downsized operations while others eventually closed or moved to suburban and office parks.

But the real estate sector has been projected to remain a perfect hedge against inflationary pressures and currency volatility with returns expected mainly in the retail, office parks and hospitality segments.

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