Office oversupply

SHARE   |   Monday, 30 May 2016   |   By Kabelo Adamson
Exponential Building in Gaborone,CBD. Insert; Seretse & Palai Exponential Building in Gaborone,CBD. Insert; Seretse & Palai

The mushrooming of new property in the city, particularly in the office sector, has led to an oversupply which in turn has led to the market being subdued, experts in the industry have said. Speaking during the Afena Capital Press Club session on Thursday morning, Bakang Palai – the director of GFI Property Group – said of recent office space has become saturated with vacancies rising, giving tenants a chance to dictate terms when it comes to rentals. Palai said with the development of high end areas such as new Gaborone CBD, tenants are now spoiled for choice with the liberty to move to their preferred location. He cautioned property developers to be cautious in the office space sub sector. He said opportunities still lie in the residential market where there is demand mainly from the lower market. Afena Capital Botswana Managing Director, Bakang Seretse, noted that the residential segment suffered a knock in the last two years due to factors such liquidity in the banking sector as financiers slowed in lending while on the other hand loss of jobs such as in the mining sector led to repossessions by financers as people were unable to service their mortgages. His sentiments were shared by Modiredi Maruping of Maruping Real Estates who is the president of Real Estate Institute of Botswana (REIB) – an association that regulates the real estate profession in Botswana.

Maruping is of the view that the office space in the city has reached its maximum, explaining that new buildings are now going at cheaper rates affording tenants to move to new cheaper offices. Maruping said his only advice to property developers is to build offices for contracted clients. He said building offices for rental purposes will be a gross mistake on the part of the developer as trends shows rates are now being dictated by tenants. As for the retail sub-sector, Maruping said it is difficult to explain the developments and upgrades of shopping malls in the city, saying the general believe is that Batswana have a hunger for spending. He said it is not clear how the government policy to reserve the retail space to locals will affect that market but said opportunities are still there in the industrial sub sector. Palai said the retail sector has in recent times experienced entrance of new shopping malls which he said has intensified competition among the players leading to unique offerings. While the property scene in the city is taking new direction, it is a different picture in town and villages. Even though growth in the retail sector has been registered in some towns and villages, Palai said people in those villages often want to pay lower rentals. “The challenge as you move away from the city is, end users in far places want to pay low prices,” Palai said.

He said the office market in places away from the city is a different story as it still at infancy stage mostly driven by government and parastatals as they are the primary occupiers. Going forward, Palai said there is a need to engage the private sector in the delivery of infrastructure such as roads, water and sewage and believes the government should not be the one raising buildings but be left to local property developers. He said the public ought to be educated about the dynamics of property sector, saying property can make or break you. “If you make a wrong decision, that can make one’s life miserable,” Palai said, adding that there are various alternative investments to consider such as property listed funds. He said the implementation of green buildings in Botswana needs to be seriously looked into. “Developers have to be proactive with regard to building sustainable buildings. We need to start interacting with clients, investors and government to lobby for sustainable building,” he said.