Commercial property market improves in last year's fourth quarter
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SALES activity levels in all three major commercial property sectors: industrial, retail and offices increased mildly in the fourth quarter, following a “dip” in the previous three months that might have been KwaZulu-Natal/Gauteng unrest-related.
FNB’s latest Property Broker survey showed the percentage of broker respondents perceiving business conditions to be satisfactory, had increased in the fourth quarter survey to 32 percent – up from 25 percent the previous quarter.
However, despite the improvement, it remained at a “very weak level” and largely reflective of still weak business confidence across the economy, said FNB Commercial’s property sector strategist John Loos in the bank’s latest Property Insights.
The level implies that 68 percent of respondents were dissatisfied with business conditions, but it was nevertheless the highest percentage of respondents who were satisfied with conditions.
The first quarter 2020 survey was held just prior to the Covid-19 lockdowns.
“When asking brokers for their ratings of market activity levels on a scale of one to 10, we see that the group of respondents is still most upbeat about the industrial and warehouse property market,” he said.
The industrial property market’s activity rating rose from 5.25 in the prior quarter to 5.75. The retail property activity rating also increased to 4.38 from 4.09.
The office property market activity rating remained the weakest of the three market sectors, although rising to 3.78 from 3.35.
The retail property class, although having made some significant progress since the 2020 lock-downs, appeared to be battling to make further recovery progress of late, said Loos.
TPN data pointed to this class still having the worst tenant payment performance of the three property classes.
“Consumers remain financially constrained, and online retail is a growing challenge. These factors might be hampering improvement in perceptions of retail property as an investment at current high values,” he said.
The office market remained the weakest of the three, after the successful forced work-from-home “experiment” left many companies re-assessing their office space requirements.
“The market activity impact from the start of the SA Reserve Bank’s interest rate hiking will only become apparent in the first quarter 2022 survey,” said Loos.
The FNB Commercial Property Broker Survey surveys a sample of commercial property brokers in and around the major metros of South Africa: the cities of Joburg, Ekurhuleni, Tshwane, e-Thekwini, Cape Town and Nelson Mandela Bay.
A feature of the fourth quarter survey was that the industrial property market sales activity rating had exceeded its pre-lockdown first quarter 2020 rating, for the first time.
The retail and office activity ratings remained below their pre-Covid 19 lockdown-levels.