The FNB Commercial Property Broker Survey for the third quarter shows that all three major commercial property buying/selling markets are substantially oversupplied, which appears supportive of the financial services provider's expectation of a near-term decline in commercial property values.
This study surveys a sample of commercial property brokers in and around the six major metros in South Africa, namely the City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, the City of Cape Town and Nelson Mandela Bay.
Key themes that emerge from the results include that the industrial property market appears to be the strongest of the three major commercial property sectors – industrial, retail and office.
However, the very weak perceived demand/supply balance in all three property classes has continued in the third-quarter survey.
In the area of industrial property, it appears that the three coastal metros, that is Cape Town, Nelson Mandela Bay and eThekwini, are where the relative market strength lies, with Gauteng's metro regions being the area of relative weakness, and Johannesburg being especially weak.
However, in the office and retail property sectors, all the metros showed market balances.
Given a greater bias towards “oversupply” in all three major commercial property markets, FNB anticipates a greater magnitude of negative all property capital growth for this year.
FNB further states that the office property sector appears to have overtaken retail property in terms of becoming the weakest of the three major property classes, with the “Zoom Boom”, remote working and potential company scaling down of office requirements, overshadowing the online retail challenge to retail property.
DEMAND VS SUPPLY
All three property sectors have the majority of respondents pointing to “supply exceeding demand”, either “somewhat” or “far”.
The industrial market has the lowest percentage of respondents, with 54% perceiving supply to exceed demand, whereas 86% perceive supply to exceed demand in retail property and 95% in the case of the office property market.
Respondents again perceive all three markets to be significantly oversupplied, with the industrial market believed to be the least oversupplied, followed by office and then retail.