Remote working hits property giant; firm laments low uptake of office space

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By Alois Vinga

FIRST Mutual Property (FMP), a subsidiary of First Mutual Holdings, has lamented the low uptake of space in the Central Business District (CBD) zone due to the adoption of remote working routines, prompting the implementation of tactical strategies to remain profitable.

Presenting the subsidiary’s financial performance for the period ended December 31 2021, FMP chairman, Elisha Moyo, said during the review period, the property market experienced supply demand imbalances.

“The excess supply of space in mainly historical space redundancy, with the sectors worst affected being the Central Business District offices, high density suburban shopping centres and the specialised industrial sectors,” he said.

He attributed the slowdown in uptake to the ageing product, whose facelift is mostly affected by unsustainably high investments required to revamp and modernise the product, as well as the gradual shift to a hybrid of remote working and reduced office presence during the year

Despite the challenging operating environment, the group posted positive results during the year, with inflation adjusted Net Property Income, after administration expenses, growing by 55% to $175,9 million.

“Revenue grew by 167% ahead of inflation at 60,7% driven by the repricing of rentals and stable occupancy level during the period . Sustained revenue growth was on the back of rental income growth anchored by a relatively high average occupancy level of 89,93% during the year,” said Moyo.

During the review period, the group continued to work closely with tenants to ensure mutually beneficial and sustainable business relationships, as various initiatives were pursued during the year to sustain the group’s business operations and the tenants’ as well.

“The group values its tenants’ experience, and in keeping with this objective, committed $25,8 million and 15,8 million towards maintenance and improvements respectively during the year.

“As a result of effective tenant relationship management, the company enjoyed an improved collection rate of 82% during the year, compared with 80% last year,” said Moyo.

He underscored that an independent property valuation conducted by Knight Frank Zimbabwe valued the company’s portfolio at $22 billion, as the growth in property values of 135% were driven by growth in rentals as capitalisation rates remained unchanged during the period.

“Going forward, the economic outlook remains favourable, despite high levels of uncertainty, due to resurgence of inflationary pressures and Covid19 induced cost push factors, particularly logistics and shipping costs as well as delivery delays.

“These developments will put undue pressure on the cost of doing business and execution of development projects,” added Moyo.