The office rental market remained relatively resilient during 2012, despite dramatic political and economic developments in Malawi. However, the currency devaluation in May 2012 negatively affected new office development and also triggered landlords’ demands for rental increases, particularly for rents that are not linked to the US Dollar. Conversely, landlords with Dollar-linked rents saw a huge jump in rents and the subsequent free fall of the exchange rate has meant that rents have been constantly changing in local currency terms. The Blantyre market continues to struggle with excess vacant space while there is unsatisfied demand for office accommodation in Lilongwe. The extreme uncertainty in the Malawian economy in 2012 led to high demand for property from investors seeking to channel excess liquidity into safe investments, pushing yields down to low levels.
Retail business in Malawi is dominated by imported merchandise and has therefore been greatly affected by foreign exchange shortages. So far, the retail rental market has been resilient but there are indications that activity will soon begin to slow as consumers’ purchasing power continues to be eroded by the high inflation caused by the devaluation and the free fall of the exchange rate. The construction of Gateway Mall in Lilongwe, which will be the largest shopping centre in Malawi, has been delayed by the recent economic uncertainty, and its opening date has been shifted from February 2012, as originally planned, to sometime in 2013. The cost of the centre was initially estimated at K6 billion (c.US$20 million), but is likely to double by the time construction is completed.
In addition to the shortage of foreign reserves, the industrial sector continues to face serious challenges in the form of electricity blackouts leading to below-capacity production. These factors have led to retrenchments and the closure of some businesses. The current reduced level of industrial activity is reflected in weaker demand for industrial property, leading to stagnation in rental levels and property values. Future developments in the sector are uncertain, as the effects of recent economic reforms aimed at boosting local industry are still unfolding, but the expectation is that these reforms should boost demand for logistics and warehouse properties
The residential market has suffered from the effects of the chaotic economic situation. Demand has fallen in both the rental and sales markets, particularly in Blantyre. The Lilongwe market continues to benefit from the existence of a large ex-pat community, which has traditionally influenced the linking of rents to the US Dollar. There has been considerable recent activity in the upgrading and modernising of older buildings in good locations to meet ex-pat demand for high quality residential properties.