Industrial, warehouse segments driving activity in commercial rental market

Activity in the commercial rental property market remains highest in the industrial and warehouse segments, a commercial property broker survey for the first quarter released yesterday by FNB showed. Photo: Supplied

Activity in the commercial rental property market remains highest in the industrial and warehouse segments, a commercial property broker survey for the first quarter released yesterday by FNB showed. Photo: Supplied

Published Apr 16, 2021

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CAPE TOWN - ACTIVITY in the commercial rental property market remains highest in the industrial and warehouse segments, a commercial property broker survey for the first quarter released yesterday by FNB showed.

Industrial and warehouse property market respondents drove the activity rating in this segment to 6.51 compared with 4.5 in the “lockdown” second quarter of 2020.

It was the third consecutive quarter in which this sector’s activity rating has increased.

The retail sector also saw a strengthening in its market activity rating, to 5 in the first quarter from 3.62 in the second quarter of 2020.

However, in line with other data, the office sector’s activity rating declined to 3.49 from 3.70 in the hard lockdown, leaving it as the sector with by far the lowest rating of the three major commercial property sectors.

The survey sampled the views of commercial property brokers in the six major metropolitan areas. Brokers rated rental market activity on a scale of 1 to 10, with 10 the strongest level of activity.

While the industrial and retail activity ratings have both improved post-lockdown, only the industrial sector managed to recover to a rating above pre-lockdown levels in the first quarter of this year.

The aggregate perception of rising vacancy rates was still only strong in the office sector.

“The survey for industrial property may be reflecting what the most recent Manufacturing PMI (Purchasing Managers’ Index) readings have been telling us, that stronger times are at hand,” FNB said.

“The one up-to-date leading indicator pointing to some strengthening is the Manufacturing PMI new sales orders sub-index, which had risen markedly in the last three months to a healthy level of 60.4, a level well back into expansionary territory.”

And while square metres of industrial space plans passed had declined sharply since 2018, recent new space completions remained “significantly elevated”.

On near-term market activity expectations, brokers in all three markets were “moderately” biased towards strengthening.

Concerns about Covid-19 and its impact on the economy and the property market remained strong.

The biggest factor influencing office property expectations was how companies revised their need for space as remote working increased in importance, but the recession-related decline in employment was also a factor.

In retail property, brokers pointed to a significant level of new business start-ups, while few pointed to online retail as a key issue.

Average office rentals were expected to continue to decline in the short term. The state of the economy and the consumer remained a significant issue for the group.

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