The real estate sector continues to suffer the knock-on effect of the Covid-19 pandemic which has dampened economic activities, resulting in reduced demand for commercial properties, an industry insider has said.
Knight Frank managing director Don Whayo said in a written response yesterday that just like in other countries across the globe, the pandemic has hit hard the Malawi commercial and residential real estate business.
He said with the focus of many businesses directed towards ensuring that they remain afloat, it has resulted in unprecedented drive to cutting costs and refraining from new investments.
Said Whayo: “The main effect of the situation is that businesses are seeking to move into cheaper commercial accommodation, thereby negatively affecting demand for expensive accommodation.”
He said the expat and diplomatic communities which the sector survives on, has to some extent become unreliable due to surrendering of leases as a considerable number of them opt to leave the country either temporarily or permanently, thereby affecting the income of property owners.
Whayo said the sector is experiencing declining demand for the upmarket properties, leading to low take up and long listings of vacant houses.
In its latest analysis on the impact of the Covid-19 pandemic on the real estate, the International Monetary Fund (IMF) also noted that the containment measures put in place in response to the pandemic shuttered businesses and offices, and dealt a severe blow to the demand for commercial real estate.
The IMF said that beyond its immediate impact, the pandemic has also clouded the outlook for commercial real estate, given the advent of trends such as the decline in demand for traditional brick-and-mortar retail in favour of e-commerce or for offices as work-from-home policies gain traction.
Whayo said although the working from home arrangement has not clearly taken traction in Malawi, it has the potential to force businesses out of conventional office space.
He said: “There is ample evidence of leases in some sections of the hospitality industry being surrendered because business has diminished to a level where it can no longer afford to maintain profitable operations which can meet its rental obligations among other business commitments and therefore the only option is to fold up.”
Employers Consultative Association of Malawi (Ecam) recently cautioned that firms may continue to lay off workers as they continue to struggle in view of the rising Covid-19 cases.
Ecam executive director George Khaki is on record as having said that most companies are operating below capacity as such they are resorting to minimising production costs, resulting in job losses.
Ecam estimated that by March this year, 680 496 jobs were be lost due to the pandemic.