File picture: Richard Vogel/AP.
File picture: Richard Vogel/AP.

Property sector struggling in South Africa

By EDWARD WEST Time of article published Jan 28, 2020

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CAPE TOWN -  Office, industrial and retail property brokers perceive market activity to have declined in the fourth quarter of 2019, a survey showed yesterday. 

The percentage of respondents who believe market conditions to have been satisfactory in FNB’s Fourth Quarter Commercial Property Broker Survey fell for the 3rd consecutive quarter, from 49 percent in the third quarter, to 31 percent in the fourth quarter.

When brokers were asked for their ratings of market activity levels, they were the most upbeat about the industrial and warehouse market.

The industrial property market, nevertheless, still had a weak reading of -12.

The office sector index reading was a negative of  -36, implying that the percentage of respondents perceiving a decrease in activity in this sector exceeded those perceiving an increase by 36 percentage points.

The retail market returned the weakest reading, a negative -52.

The Property Market Activity Near Term Expectations Indices, reflecting broker near term expectations, saw the respondents least optimistic about the retail property market, which recorded a negative -6, whereas the industrial property market recorded a +22 and the office property market +8.

The impact of technology on office space, through remote working, and retail space demand through e-commerce, remains perceived as relatively low, compared to the negative impact of toughening economic times, according to the brokers surveyed.

FNB’s Commercial Property Broker Survey surveyed a sample of commercial property brokers in and around the six major metros: City of Joburg and Ekurhuleni, Tshwane, Ethekwini, Cape Town and Nelson Mandela Bay.

A prerequisite in selecting broker respondents was that they at least deal in owner-serviced properties, but a portion also had dealings in the developer or investor markets, as well as in the listed sector.

“Looking ahead to expected activity in the coming 6 months, the group on aggregate is most optimistic about activity in the industrial and warehouse market, but expects a decline in the ailing retail market’s activity level,” the survey noted.

“Economic and political uncertainty” was the key factor influencing near-term expectations.

In the retail property response 14 percent of respondents cited “shoppers moving online… leading to a decline in shoppers coming to malls”, and for the four 2019 surveys, this factor’s percentage has averaged 14.5 percent.

So online shopping is consistently seen as a factor in influencing retail market performance and activity, by a not insignificant percentage of brokers. However, it still appears as far less troublesome than the weak state of the economy.

BUSINESS REPORT 

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