Your Property, Our Responsibility

Falling Rent, Low Occupancy Hit Property Developers Income

Real estate investors have reported double-digit losses in income as the Covid-19 pandemic keeps rent prices low and causes poor uptake of space, a report by realtor Knight Frank shows.

Hospitality, retail and health centres have been the most affected assets, posting 50.5 percent, 41.4 percent and 26.7 percent drop respectively in income in the 12 months to April.

Others such as office and manufacturing properties posted 19.54 percent and 16.97 percent declines respectively. On the other hand, those renting out their property to data centres posted a 16.96 percent rise in returns over the period, benefiting from the demand from online and software infrastructure firms.

The decline has been attributed to economic slowdown heightened by the pandemic that has resulted in most businesses putting on hold space requirements as they focus on operational rather than capital expenditure.

“Tenants have been looking to cut overheads while others don’t want to make any commitments when they do not know the market situation in the next coming years,” Knight Frank managing director Ben Woodhams said in a virtual summit by East Africa Property Investment (EAPI) last week.

Due to the virus crisis, consumers have changed their shopping patterns from retail centres to online shopping leading to a decline in footfall especially in April and May, which affected the ability of the property to generate income.

“Landlords over the review period provided concessions and incentives to retain and attract new occupiers however this was done on a case by case basis,” Mr Woodhams added.

According to Nedbank Head Economist Nicola Waimar, the global recession induced by the pandemic will hurt investments in construction and both commercial and residential property.

“Real property asset values are expected to continue to be impacted by Covid-19 and we anticipate a cut down in development in most asset classes,” she said.

Compare listings