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Companies, Shops Ask Landlords to Reduce Space they Rent

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Estate agent Knight Frank managing director Judy Rugasira said in a Zoom meeting that closing retail businesses that depend on the day-to-day cash flows for 60-days was damaging. Many of the businesses were closed in March, as the country took aggressive measures to control the spread of coronavirus disease.
03 Jun 2020 13:31
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Organizations renting office space and shop owners in different malls and arcades are requesting their landlords to allow them to reduce the space they rent so as to cut costs as they look to recover from the coronavirus impact.

Estate agent Knight Frank managing director Judy Rugasira said in a Zoom meeting that closing retail businesses that depend on the day-to-day cash flows for 60-days was damaging. Many of the businesses were closed in March, as the country took aggressive measures to control the spread of coronavirus disease.

But as the country started to close down, sales in the retail sector slumped by 68 per cent, Knight Frank said. Supermarket shoppers also fell by 40 per cent although the basket size in the same month increased by 63 per cent, indicating that those that managed to go out to buy products bought in panic anticipating a situation of no movement at all. The situation got worse in April and May with the total lockdown.

Rugasira says that now renters in malls are holding discussions will landlords to change leases and reflect their financial situation at the moment.

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Meanwhile, as the country was locked down, most developers of new projects in Kampala stopped construction, a move which is likely to delay completion and the uptake rates for consumers. Also, tenants or those who had made inquiries to buy houses have put on halt their plans as they see how to go through the storm, Rugasira said. This might continue for at least the next six months.

Peace Kabunga, the Executive Director of Housing Finance Bank, said banking, one of the takers of building spaces was changing and might give up a lot of space. She said while the real branch might not close completely, it will be reduced in size. This was the trend even before coronavirus.

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On the residential side, Rugasira said, there has hardly been any letting going on. The agents were unable to take people to view houses and tenants have struggled to pay their rent. For the real estate sector, coronavirus came at a time when it was already struggling to attract demand and more properties were flooding the market.

A lot of space was being given up by government ministries as they built own buildings, there was reduced Foreign Direct Investment (FDI) into the sector and more expatriates were leaving the country. This means letting activities had reduced as well.

Rugasira says coronavirus will have a long term impact on the real estate sector, indicating that the non-performing loans that might come out of this might see interest rates up and reduce the ability of developers to borrow. 

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