Cape Town - Industrial property continues to be the best performing in the commercial property sector although it too is not buoyant. The office sector is the hardest hit, and unlikely to recover significantly this year.
This somber outlook is according to the latest key findings in the FNB Property Broker Survey results which covered the second quarter of this year.
Added to that findings also indicate a continuation in the decline of commercial property average values. This follows last year’s significant value declines, with the sector which includes Office, Retail and Industrial, significantly hit by anti-Covid strategies.
These declines, says FNB, are however not only Covid-related but reflective of the recent deep recessionary conditions from which South Africa’s economy has still not fully recovered.
“There is almost undoubtedly an economic environment driving weak demand and strong supply in property on the market, and the broker survey continues to reflect this, albeit noticeably less so in Industrial Property.”
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Prior to the outbreak of Covid-19 the local economy had been stagnating for some years, and also saw a massive -17.78% year-on-year contraction in Real GDP (Gross Domestic Product) in the 2nd quarter of 2020. “Despite some rebound thereafter, it was still recording negative year-on-year growth of -3.2% as at the 1st quarter of 2021.”
The survey found the Industrial property market was still perceived to be the strongest of the three major commercial property sectors of Industrial, Retail and Office, in terms of demand-supply balance.
The three coastal metros - Cape Town, Nelson Mandela Bay and Ethekwini, are where the relative market strength was found to lie for Industrial property market. The Gauteng metro regions however being the area of relative weakness, Johannesburg being especially weak.
Meanwhile, the office market continues to be the hardest hit, with brokers ranking the oversupply in this sector to be the highest. A significant proportion of survey respondents perceived many companies to be re-assessing their office space requirements.
In recent stories by Property360, it emerged that companies were looking at a hybrid way of working - with some days at a home office and some at a workspace. This does not bode well for the office sector, which saw a major decline last year when offices shut down, with many workers and businesses not returning during previous lifting of Levels of lockdown in the country.
“It appears increasingly likely that Office Property will be the weakest of the three major property classes in 2021, challenged by both major services sector job losses along with escalated work from home employees, dampening demand for this property class,” says FNB.
On the up side though, recent quarterly surveys in Retail and Office property show oversupply perceptions indices starting to move more sideways rather than weaker, suggesting some possible early signs of future moves towards “stabilisation” in these markets approaching.
But, FNB says at this stage, “the perceptions of significant oversupplies in all three markets leads us to the belief that our projections of further average value declines in 2021 remain justified by weak fundamentals”.