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Thursday Apr 15, 2021

All commercial property sectors in oversupply

As many as 96.6 percent of respondents in the office property sector pointed to an oversupply, 90 percent in the retail property sector and 54.8 percent in the industrial property sector, according to FNB'S latest Property Broker Survey.

All three major commercial property sectors - industrial, office and retail - remained oversupplied in the first quarter this year, although the oversupply was noticeably less in the industrial property market, according to the latest Property Broker Survey from First National Bank (FNB).

Brokers in the office and retail property markets perceived a rise in the average time of properties on the market before sales in the six months before the first-quarter survey, with a slightly declining average time on market bias only in the industrial property sector, FNB Commercial Property Finance sector strategist John Loos said in the survey.

He said the broker group perception was tilted strongly towards the existence of an oversupply, and this was most severely the case in the office property market.

As many as 96.6 percent of respondents in the office property sector pointed to oversupply, 90 percent in the retail property sector and 54.8 percent in the industrial property sector.

Recent surveys had, however, shown a noticeably diminished bias by brokers towards "oversupply" in the industrial market, but this had not been the case in the retail and office property, whose "oversupplied" responses by brokers remained very high.

"The fact that the survey still shows an oversupplied bias in all three major commercial property markets, with very significant ones in retail and office, appears reflective of the deep recessionary conditions that South Africa's economy finds itself in," said Loos.

One of the "casualties" of an oversupplied market had been a sharp decline in investment in the building of new commercial space in recent years, which was bad for the building sector, but necessary to restore some demand-supply balance, and weak new building activity appeared likely to continue this year.

Building activity in the industrial property market, the least oversupplied, had seen its planned building activity "hold up" the best: for the 12 months to January, square metres of industrial space new building plans passed were at 63.7 percent of the 20-year average level.

Square metres of retail space plans passed were running at only 44.2 percent of the 20-year average for the sector. And with the office market being the most oversupplied sector for some years now, square meterage of office space plans passed for the 12 months to January was only 23.9 percent of the 20-year average level.

"The oversupplied market leads us to continue to expect weak new building activity in 2021, along with further decline in average property values in the near term," said Loos.

Within the industrial property market, it appeared that the three coastal metro regions - Cape Town, Nelson Mandela Bay and ethekwini - had been outperforming the two major Gauteng metro regions significantly, with Greater Joburg the weakest of all of them.

In the office market, Greater Joburg stood out as the weakest market too, but in this case with widespread weakness across all of the metros.

Greater Joburg was thus perceived to be noticeably the weakest property market in all three property classes, said Loos.

Daily News31 Mar 2021EDWARD WEST edward.west-AT-inl.co-DOT-za

    
 

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