Commercial property activity improves mildly in second quarter
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MORE THAN 55 percent of commercial property owner-occupiers are believed to be selling or relocating because of financial constraints, according to the second-quarter Property Broker Survey by First National Bank (FNB), which was released yesterday.
The 55.37 percent of respondents who held this view was noticeably down from the 65.2 percent in the first quarter, but was still 12.3 percentage points higher than the 43.1 percent recorded in the second quarter of last year.
The survey was taken from a sample of commercial property brokers in the six major metros: Joburg, Ekurhuleni, Tshwane, eThekwini, Cape Town and Nelson Mandela Bay.
FNB Commercial Property Finance property strategist John Loos said the survey showed that financial pressure was still the single-biggest driver of movement and sales of owner-serviced commercial properties.
However, the latest quarterly decline was a possible early sign that financial pressure was alleviating as the economy gradually recovered from last year’s deep lockdown-related recession, he said.
Sales and relocation for bigger and better premises remained low at 11.1 percent, which was still significantly down on the 18.4 percent reading from the pre-lockdown first quarter of last year. However, it too improved mildly from the previous quarter’s 9.3 percent.
“This percentage ... already declined as economic times toughened prior to Covid-19 lockdown, but then fell far more noticeably in the second quarter of 2020 as lockdown caused the recession to go far deeper,” said Loos.
The 11.1 percent therefore reflected a combination of the tough economy and a cautious approach to property at a time when business confidence was mediocre at best, he said.
The estimated percentage of sellers who were selling in order to move closer to their market fell further to 20.5 percent of total sellers in the second quarter, the lowest percentage since the survey started, down from 21.6 percent in the prior quarter and down from 36.3 percent at the beginning of 2019. This suggested a “wait-and-see” approach by an increasing percentage of aspirant sellers.
“While it may often make sense to incur the cost of relocation closer to one’s market, in such weak economic times less relocating and more ‘staying put’ for the time being was the likely outcome,” said Loos.
By region, the greatest level of financial pressure-related selling or relocation was perceived to be in Gauteng. Tshwane was the highest in the second-quarter survey at 85.3 percent of sellers, but Greater Johannesburg had seen some perceived decline, recording 54.7 percent in the most recent survey.
Of the three coastal metros, the worst percentage was recorded by Cape Town at 48.6 percent. It was followed by eThekwini at 46.4 percent and Nelson Mandela Bay had the lowest percentage, 29.1 percent.
Loos said financial pressure-related selling of owner-serviced properties could have been far worse in the 2020 deep recession if interest rates had not have been cut significantly.
“While we expect interest rates to start rising in 2022, a forecast of a 25 basis point rate hike twice during next year would be a very mild interest rate hiking move by the South African Reserve Bank.”