Industrial property seems to weather Covid-19 weakening best - FNB

6th July 2020

By: Marleny Arnoldi

Deputy Editor Online

     

Font size: - +

Brokers continue to perceive the industrial property market as the strongest of the three classes in commercial property – industrial, retail and office.

However, there have been weakening demand-supply balances in all three property classes since Covid-19 hit South Africa, says FNB property sector strategist John Loos.

The bank reports on the state of the various property classes in its FNB Commercial Property Broker Survey, which was released on July 6.

The survey includes responses from a sample of commercial property brokers in and around the six major metropolitans of South Africa – Johannesburg, Ekurhuleni, Tshwane, eThekwini, Cape Town and Nelson Mandela Bay.

This survey deals with questions relating to the perceived balance/imbalance between demand and supply of properties being transacted in the main markets.

Market “strength” refers to a relatively strong demand level relative to supply, and vice versa. These questions include estimates of average times of properties on the market prior to sale, as well as perceptions of whether demand exceeds supply or vice versa.

Loos explains that, broadly speaking, it appears to be that the three coastal metros – Cape Town, Nelson Mandela Bay and eThekwini – are where the relative market strength lies, with Gauteng metro regions being the area of relative weakness, with Johannesburg being especially weak.

Nelson Mandela Bay and eThekwini are perceived to be strongest markets in the area of industrial property, eThekwini and Cape Town in retail property, while Cape Town’s office property market is perceived to be the strongest.

FNB reports that the Gauteng metros are perceived to be where the general weakness has been recently, especially Greater Johannesburg.

The relative picture between the three major property sectors is still one where brokers perceive the industrial property market to be the strongest of the three classes, with an average time on the market for occupied industrial properties of 19.74 weeks being slightly quicker than the 23.58 weeks in the case of office and 25.28 weeks for retail space.

Vacant industrial properties, too, averaged the shortest average time on the market of about 24.39 weeks, compared with 29.56 weeks in the case of office space and 28.72 weeks in the case of retail properties, in the second quarter’s survey last year.  

An apparent anomaly – brokers perceive average time on market to have lengthened over the past six months, but this does not show up in their average perceived time on market.

Loos says an interesting anomaly has cropped up in this year’s second quarter survey.

On the one hand, when asked to estimate the average time of properties on the market prior to sale, the second quarter broker respondents perceive a lower average time on the market for all three categories of property compared with what the broker respondents from prior year’s second quarters estimated.

However, when asked if they perceive the average time on the market to have “increased”, “decreased” or “stayed the same” over the past six months, the dominant perception is that the average time on market has increased, which Loos says is the response that one would expect at a time of deep recession.

Viewing the perceived average time on market estimates, the average estimated time that the three property categories are on the market for, prior to sale, has declined on the prior two quarters in both office and industrial markets, while retail property’s estimate is higher than the first quarter but also down on two quarters ago.

Loos explains that lower average times on the market compared with estimates one to two quarters prior, which would normally point to a strengthening demand-supply situation, would appear inconsistent with the responses to follow-up questions where second quarter respondents perceive the average times on market to have increased over the past six months, and the market to have become more oversupplied in the second quarter of this year.

“We would put this apparent anomaly down to practical difficulties at the best of times with estimating the average time of properties on the market accurately, and the likelihood that this has become far more challenging during the recent lockdown period.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

The functionality you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION