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Commercial property brokers optimistic about future sales

There was a noticeable increase in optimism about the future strengthening in sales activity in all three property classes, industrial, offices and retail, during the first three months of 2022. Photographer: Waldo Swiegers/Bloomberg

There was a noticeable increase in optimism about the future strengthening in sales activity in all three property classes, industrial, offices and retail, during the first three months of 2022. Photographer: Waldo Swiegers/Bloomberg

Published Apr 5, 2022

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There was a “noticeable” increase in optimism about the future strengthening in sales activity in all three property classes, industrial, offices and retail, during the first three months of 2022, the latest FNB Property Broker Survey showed.

“The respondents are most optimistic about industrial property market activity’s direction in the near term, returning a positive reading to the tune of +38.46,” FNB Commercial Property Finance Property Sector strategist John Loos said on Friday.

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Commercial property brokers in and around the six major metros were surveyed – the broker respondents all deal in owner-serviced properties and some in the developer or investor markets as well and in the listed sector.

Loos said the improvement in optimism in all three property classes was in spite of interest rate hiking late last year.

“We sense this surge in confidence has much to do with a feeling the Covid-19 pandemic risk is receding as vaccines are rolled out, lockdown regulations have eased further, and that 2022 is likely the year in which economic activity and human interaction normalise, whatever the ‘new normal’ might mean,” he said.

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The industrial property market’s positive reading of +38.46 was up from +25 in the prior quarter.

The office market had improved well with a reading of +32.26, up from the previous quarter’s +23.73.

The brokers were least optimistic about the retail market by a small margin, but this property class had also strongly improved to a reading of +30.19, up from only +7.69 the previous quarter.

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While the brokers were biased towards “strengthening sales activity direction” in all three markets, there remained a significant negativity about the state of the economy.

In the office market, 61.29 percent of respondents cited some form of “effect of Covid-19” as a key factor driving their activity expectations.

“It’s becoming difficult to link unfolding economic and policy events with Covid-19. For example, interest rate hiking has been much of an indirect consequence of Covid-19 via its inflationary impact caused by supply chain disruptions across the globe. But as time goes by, economies recover, and other inflation drivers such as the Ukraine conflict emerge, the link between Covid-19 and interest rate hiking diminishes,” said Loos.

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A still significant 32.26 percent of brokers perceived companies to be re-evaluating their office space needs, and in many instances downscaling on office space.

The “work from home” surge during the Covid-19 lockdown featured in space requirements revisions. But job losses in the finance, real estate and business services sector might have also played a role, said Loos.

“Interest rates” had been cited by 12.9 percent of brokers as a key factor. A further factor cited was “changing trading conditions”, which was mentioned by 16.13 percent.

The majority here pointed to renewed growth in the smaller business segment, and investors finding value in the office property market.

In the industrial and warehouse property market, “stock issues” were the major factor, with 33.85 percent of respondents pointing to this, an overwhelming majority indicating stock shortages.

Respondents (24.62 percent) also pointed to industrial properties’ appeal to small businesses, a segment they perceived to be growing, and increased logistics and warehousing demand due to online retail, as factors.

In the retail market the percentage of brokers pointing to Covid-19 related factors as an issue receded to 16.98 percent from higher percentages in prior surveys, and a large percentage, (28.30 percent) cited “economic and political uncertainty” as a key issue influencing their expectations.

Not all brokers were pessimistic about the economy though, with 13.21 percent citing “positive business sentiment” as a factor.

BUSINESS REPORT

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