Malawi

Office leasing activity in mixed fortunes between cities

Business closures during the pandemic mean that commercial landlords are grappling with significant debtor balances. This situation has been exacerbated by an economic downturn in the last quarter of 2023. Nonetheless, landlords, property managers, and occupiers remain optimistic, buoyed by expectations of an economic resurgence fuelled by the ongoing harvest season and tobacco auctions.

Persistent challenges such as parking issues, street vending, and the relocation of government, NGO, and diplomatic offices from Blantyre to Lilongwe, the capital city, have contributed to subdued economic activities. Consequently, demand for CBD offices in both Lilongwe and Blantyre has experienced a slight decline, with a notable oversupply of office spaces in both cities resulting in vacancy rates averaging around 20-30%.

While demand hasn't entirely dried up, relocating some government offices from Blantyre to Lilongwe has led to an increase in office supply in Blantyre and a corresponding decrease in rental growth in Lilongwe.

Sustained demand in retail market

Retail occupiers are gravitating towards high-traffic areas within town centres to maximise footfall. Sustained demand means vacancy rates remain low across key cities such as Blantyre, Lilongwe, and Mzuzu. Prime monthly rents are approximately US$ 10 psm in these urban centres.

However, in the former capital Zomba, low economic activity has dampened demand for retail spaces compared to other urban centres in the country.

Subdued growth in the industrial sector

The industrial sector in Malawi is of a modest scale due to the economy's heavy reliance on agriculture and a relatively small number of manufacturing industries. This translates into limited growth prospects for the sector. Warehousing facilities are primarily owner-occupied or leased by a select few heavy manufacturing enterprises, particularly those associated with emerging sectors such as agricultural produce storage, agro-food processing, and logistics.

Over the past few years, monthly lease rates have remained steady at approximately US$ 3 psm. Given the comparatively modest rental rates, negotiations typically revolve around the unit's specifications rather than its cost.

Weak prime residential market

In Lilongwe and Blantyre, self-funded home construction continues to thrive, largely driven by unfavourable lending rates. However, the number of residential units under development is anticipated to decline rapidly this year due to a significant rise in construction costs.

Elsewhere, economic challenges have dampened the prime residential leasing market. Sluggish job creation rates have resulted in subdued demand and stable rental rates. Similar to trends observed in other African markets, demand remains concentrated on mainstream and affordable housing, where a lack of supply continues to exert upward pressure on rates. In response to the economic downturn, landlords and property managers are implementing rental increases of approximately 20-25%.