Landlords stare at empty buildings as Covid impact bites

When government announced phased lockdown in late March 2020, a number of downtown shopping centres began slowly feeling the pinch of the lockdown.

Ms Sylvia Namukasa, until April 2020, had been operating a shop at Trade Link on William Street. She said she had been dealing in phones and phone accessories for close to five years. However, in April, they were told to lock their shops and go home for 21 days because of the Covid-19 pandemic. Days turned into months and her landlord started issuing them eviction notices because she could not afford to pay rent.

“I pleaded with him, but he could not listen. At first, he threatened to confiscate my merchandise, but later on he ordered me out with all my merchandise. In June, I left the place after failing to sell a single phone the last two months because the place was closed,” Ms Namukasa said. 

After a while, she found a place in Kyebando, close to her home and has since relocated her phone business there.

“Now here I pay cheaper rent and make more profit because the other side I was paying $400 (about Shs1.4 million) per month, for a small space, but now here I only pay Shs400,000 for the whole of this front shop,” she said.

For Ms Rachael Arinaitwe, although moving away from the city centre was a tough decision, it has saved her the hustles of traffic jams and transport money. Prior to the lockdown,  Ms Arinaitwe was renting at Kirumira towers, but has since moved to Kisaasi. 

“Two of us were renting the same shop and we were sharing the bills. I was dealing in ladies products, while my friend concentrated on phones and electronics and each of us was paying rent of Shs800,000. When the lockdown happened, we lost business. Even after reopening, the situation did not improve and we started making losses. I eventually decided to open the shop at Kisaasi where I now pay a rent of Shs350,000,” Arinitwe said.

“For me, this has helped because now my customers from this side do not have to travel to town, but since most of them know my place, they just pass by and pick whatever they want,” she added. 

The situation

In downtown, the heart of the central business district (CBD), a number of shopping arcades are either half occupied, or the occupancy rate stands at 2/3 of the total space. 

The Kampala Arcade Traders Association said the situation is dire for them. The members said with the dwindling businesses, many of them have opted out of the CBD to get cheaper alternatives in the suburbs.

Mr Mathias Ssenyonjo, the spokesperson of the association, said many of their members have lost businesses and have gone back to the villages. The association has about 2,052 members operating in arcades with the Kampala CBD, but Mr Ssenyonjo says close to half have been gravely affected by the impact of the pandemic. 

“Most of them have abandoned their businesses and gone back to villages for farming. For others, I don’t know where they are because they left the buildings and their merchandises in the shops. They had no relief from the banks and the banks have captured their merchandise,” he said. 

He said all their efforts to seek for help from government have not yielded any fruits.

“We have raised our plight to the government several times and they only keep on promising but have never implemented those promises,” he said. 

A number of property owners Daily Monitor spoke to were not willing to engage in any discussions, but referred us to property managers, who they said are in better positions to explain the dynamics in the sector.

Mr Moses Lutalo, the managing director – Broll Uganda that manages a number of high end properties in Kampala, said the impact is real. He said while the arcades have been heavily affected by the impact of Covid-19 lockdown, the situation is slightly different from high end residential and commercial properties. 

“Definitely the impact of the lockdown on both downtown and upmarket is different. Similarly, the different segments of the real estates have been impacted differently. So the retail market which involves people in downtown, supermarkets and retailers is different from how office users like in Rwenzori Towers, Crested Towers or any other commercial building, same as residential and industrial areas,” he said. 

“For example, when they locked down the economy, there were sectors that were not completely working. You couldn’t go to supermarkets because people were not leaving homes so they got used to the neighbourhood markets. Even people trading in downtown resorted to electronic means of reaching out to their clients,” he added. 

He challenged arcade owners to restructure and have tenancy agreements and better ways of managing their property.

“There are landlords in downtown that who been adamant. It has always been you don’t have a tenancy agreement, pay this or leave it because I can get another tenant…,” he said. 

Mr Lutalo also said the residential sector has been hit, because a number of expatriates left the country, leaving empty houses in upscale areas of Kololo, Nakasero, Naguru and other high-end residential areas across the city.

“Experts left the country, some were locked out and they don’t want to come back. So you will find out that there are many apartments in Kololo and Nakasero in Kampala that are vacant. If you don’t have foreigners coming in, no one is going to pay $3,000 (about Shs10.9m a month) for such apartments,” he said. 

Ms Shirley Kongai, the executive director of the Association of Real Estates Agents, told this paper that the situation has been tough for the real estates business.

“We have felt the impact and even our members who are the real estates agents have been affected. Right now, the occupancy rates are low across all segments, but hopefully things will get better,” she said.

“Of course it is a tough time, but we hope to eventually bounce back. We have empty spaces and the demand is low right now and this has affected our revenues,” she added.

At Kampala Capital City Authority (KCCA), the mood looks downcast. Officials from the City Hall say their planned revenue projections have been hit, and with that comes the delayed completion of planned activities.

Mr Daniel Nuwabiine, the KCCA spokesperson, said the Covid-19 impact is real on their efforts to collect more local revenue.

“Covid-19 has had an extensive impact not only on revenue generation, but also on other sectors, but we have had a lag in compliance in all the major revenue sources. Talk of property rates, trade licence, ground rent, and even local service tax. By the end of the last Financial Year 2019/2020, our collections were at Shs78.39b. Now if you compare that to the previous year, in which we had Shs90.53b, it is a drop of about Shs12b,” he said.

“This significantly affects or service delivery.  When we compare our collections for the third quarter of 2019/2020 with the current third quarter, we still see another huge gap of collections so it means businesses have been significantly affected. The people who would pay trading license are not paying, the people who would pay property rates are not fully complying as they were, so there has indeed been a dip in the revenue mobilisation for the authority,” he added. 

Mr Nuwebiine said a number of planned interventions have all stalled because the authority does not have enough money to complete them.

“There are activities we planned to do off budget, for example, the New Taxi Park, we expected local revenue to have come in and we complete that, but we have not completed it. 

There are drainages, there are channels, there are street lights which we expected to put up, out of the local revenue, but we have not done any of them because of the drop in the revenue,” he said. 

Mr Nuwabiine added that a number of revenue sources were suspended either on the directives of President Museveni or through court pronouncements.

“We intend to bring on board those sources of revenues that had been abandoned. For example, the commercial road user fees was giving us an average of Shs24b per annum. If we can fast-track the implementation of park user fee, then we may be able generate more revenue. 

We have the outdoor advertising fees that were suspended by the court, we also need to regularise the fees such that they are admissible at law in order for us to generate revenue. In outdoor advertising, we had a target of Shs3b, but we are not getting anything,” he said. 

Disruption report   

A mid 2020 report by Knight Franks, one of the property managers in the country, painted a grim picture of the impact of the pandemic on the property in the city. The report says owing to the lockdown, both retailers and retail landlords have seen the lockdown measures heavily impact on their businesses negatively.

“The outlook after lockdown for retail trading is uncertain, and most landlords have undertaken to give stimulus solutions to their tenants on a case by case basis, so as to allow deferred rentals for up to six months,” it added. 

According to the report, while at the start of 2020, the demand for office space seemed promising with regards to increased inquiries, the report says many of these inquiries have now been put on hold as countries emerge from lock down. 

The report also indicates that the residential sector performance was not spared the effects of the lockdown. As everyone sheltered and worked from home, leasing and sales activity literally ceased, as viewings were not possible.    It also said the mass exodus of more than 1,000 foreign nationals back to their countries at the announcement of lockdown in Uganda left the fate of many tenancies for private rented accommodation in limbo.