Why Dodoma boasts full property occupancy, highest rents

Despite the growth, real estate stakeholders are cautioning property owners in Dodoma to urgently reconsider their business strategies, particularly rental pricing, if they wish to remain competitive.

They warn that many of the major tenants, especially government ministries, are relocating to the new government city at Mtumba, possibly along with their affiliated institutions. Without strategic adjustments, including targeting small and medium enterprises (SMEs) and startups as potential tenants, landlords risk facing high vacancy rates.

According to the Financial Stability Report for 2024 published by the Bank of Tanzania (BoT) last week, Dodoma’s rapid rise is largely attributed to the relocation of government offices, which has triggered a surge in demand for office space near ministries and public institutions.

“This increased demand for office space is a sign of business resilience,” said a property market expert. “It boosts creditworthiness and improves bank asset quality, especially for lenders exposed to real estate. As a result, rental prices in Dodoma have significantly outpaced those in other cities.”

Former President of the Association of Real Estate Professionals of Tanzania (Arepta) president Andrew Kato said the sector is progressing well, but it is high time the government fast-tracked the establishment of a real estate regulatory authority to guide pricing, as currently everyone in the market is setting their own rates.

“As for Dodoma, things may change for commercial buildings, as many ministries have already shifted to Mtumba,” he said, adding that building owners must now adopt strategies that respond to the changing market by reviewing pricing and restructuring to attract other tenants such as SMEs and startups.

“All I can say is that the reforms undertaken by the government, including infrastructure improvements like the standard gauge railway, have increased accessibility and attracted foreign investors to Dar es Salaam and other regions. That means demand for housing and office space has also risen.”

Rental prices in other cities, including Arusha and Dar es Salaam, remained stable, underscoring overall market stability. The strong performance of the sector is expected to reduce the risk of loan defaults and preserve collateral values.

The development suggests a positive outlook for Tanzania’s real estate market, which is expected to mitigate the risk of loan defaults associated with commercial real estate financing and reduce potential losses in the event of default, owing to stability in collateral values.

The overall outlook for financial stability continues to improve, driven by increased economic activity and a stable macroeconomic environment, including steady inflation and exchange rates.

“These factors are fostering positive sentiment among businesses and households. Significant progress has been made in increasing the resilience of the domestic financial system, particularly through the enforcement of contingency and recovery plans and the implementation of Basel II and III frameworks,” the report says.

Despite the optimistic outlook, financial stability remains susceptible to external risks, including ongoing geopolitical tensions in the region and the Middle East, trade frictions stemming from U.S. protectionist policies and climate-related disruptions.

These factors could lead to supply chain disruptions, reduced export demand and diminished foreign currency inflows, potentially affecting production and overall economic performance.