FNB survey finds falling demand in office property market
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CAPE TOWN - FNB’s FOURTH quarter commercial property survey continues to point to a strong broker perception that companies are revising their office needs lower.
The brokers perceive activity in the market to be the weakest when compared with the retail and industrial market sectors.
Globally there has been ongoing debate around the “work-fromhome” trend and whether it will or won’t impact heavily on office space demand.
Some see imminent downscaling of office space requirements by many companies, and a major glut of office space. Recently, however, some have cited the need for office space to enhance human collaborations, the argument being that working online full time has limitations in terms of human relationships.
“While office space has its place for physical meetings and interaction, our belief is that less of it is needed for such purposes, with staff able to spend a significant part of their time at home. Also, financial realities for pressured companies may play a key role in decision-making, and office space is costly,” FNB Commercial Property Finance Property Sector strategist John Loos said yesterday.
“Whether financial pressure-related downscaling or work-from-home-specific thinking, the end result looks the same, very weak demand for office space, and increased over-supply,” he said.
In the survey, brokers perceived market activity to have picked up in all three major commercial property sectors in the fourth quarter, with industrial property remaining the strongest.
The percentage of respondents perceiving business conditions to be satisfactory fell to only 21 percent however, down from 31 percent the previous quarter, following a mild third quarter increase as South Africa emerged from the second quarter hard lockdown.
The FNB Commercial Property Broker Survey surveys a sample of commercial property brokers in the six metros. The survey was done in November 2020, before the second wave of Covid-19 infections.
In all three major property markets, brokers saw the negative economic impact from Covid-19 lockdowns as still being a major influence on their near-term market activity expectations.
In the office sector, the “Zoom Boom” and its “work from home” implications continued to overshadow even the recession impact. The impact of online retail in the retail property sector was viewed as much less significant than the “work from home” impact on the office market.
The respondents were most upbeat about the industrial and warehouse property market, with the market’s fourth quarter activity rating up slightly to 4.68 points out of 10 points, from 4.64 points in the previous quarter. The retail property activity rating was lower at 3.59 points although slightly up from its prior quarter’s 3.37 points reading.
This sector, however, surprised on the upside in the Near Term Expectations Indices of Property Market Activity, the survey showed.
The brokers saw the negative economic impact from Covid-19 lockdowns as still being a major influence on their near-term market activity expectations in all three major markets.
Forty-four percent of them perceived companies to be re-evaluating their office space needs, and in many instances downscaling, thus a key factor influencing their near-term expectations of market activity in this segment. Only 2 percent of brokers pointed to stock constraints, while a greater 12percent pointed to an oversupply of stock.