On the outlook, the Company said that operating profit margins are expected to remain under pressure because of inflation and exchange rate pressures.
Harare – First Mutual Properties Limited says the evil trinity of inflationary pressures, foreign currency volatility and supply chain disruptions caused by the outbreak of COVID-19 pandemic has caused a significant slowdown in the property sector development activity.
The Real Estate company which is a subsidiary of First Mutual Holdings, has vested interests in the development and management of commercial properties in the major towns of Zimbabwe. Its property portfolio, comprises some 117 250 square metres of lettable space made up of office parks, retail shops, commercial and industrial property.
It owns and manages 41 buildings in the major economic hubs of Zimbabwe, including high-rise commercial buildings, industrial and warehouse properties and retail outlets.
Zimbabwe is officially a hyperinflation economy with annualised inflation hovering above 700% as of August 2020. Since 2019, the country has been hit by significant macro-economic difficulties characterised by currency depreciation, acute foreign currency and cash shortages, a climate-related drought, and the effects of COVID-19.
While the government has come up with a raft of policy changes to stabilise the economy including the latest introduction of a weekly foreign currency auction system, the risk factors still remains high with analysts cautioning that government will likely miss its economic targets in the absence of a tighter fiscal discipline.
In a statement accompanying the unaudited abridged financial results for the period ended 30 June 2020, the Company said that the need to comply with COVID-19 measures such as physical distancing, workplace safety protocols and limiting people on construction sites slowed the delivery of construction projects.
“However, despite these constraints, existing projects in the industrial and retail warehousing sectors progressed steadily while residential developments continued steadily,” the Company said.
The Company added that development risk remains high because of over-supply of commercial product as well as uncertainty about supply chain and development costs, although there is an anticipation that demand for real estate will increase.
“In the sales market, the majority of the transactions were in the residential market with limited commercial activity due to illiquidity hindered further by depressed debt market instruments,” the Company said.
During the period under review, First Mutual Properties reported a 11% decline in inflation adjusted revenue to ZWL68.3 million compared to ZWL80.7 million recorded in the same period in 2019.
“The decline in inflation adjusted revenue was due to quarterly rental review not matching inflation”, said the Company.
“We expect resilient demand of corporate occupiers as this client group may require larger space in order to embrace non-pharmaceutical COVID-19 protocols”.
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