FNB Commercial Property has released its second quarter results for their FNB Commercial Property Broker Survey which involves a sample of commercial property brokers in the six major metros of South Africa i.e. the City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, City of Cape Town and Nelson Mandela Bay.
Focusing on the key drivers of movement and sales activity in owner-serviced properties, the survey results show financial pressure to be the biggest single driver and this has become more prominent in the second quarter of 2020.
FNB Commercial Property does not have a long history to compare a ‘good’ or ‘bad’ level of financial pressure-related selling but the recent readings appear significant and are increasing.
Respondents are asked to give their perception of the major drivers of ‘movement and sales activity’ in the owner-serviced property segment. The brokers estimate the percentage of movement and sales that they believe would take place for a particular reason, but the total percentage of all the reasons add up to far more than 100% because businesses can be perceived to be selling or relocating for more than one reason.
It is not an exact science, but the survey provides a broad picture. The highest percentage of owner occupiers are perceived to be selling or relocating influenced by financial constraints or pressures i.e. 57.4% in the second quarter 2020 survey, significantly up from 43.1% in the previous quarter and noticeably higher than the 39.5% recorded in the second quarter a year ago.
This appears as significant with ‘relocating to a place with better transport, logistics and commuter nodes’ (24.7%) and ‘relocating to be closer to the business’ particular market’ (25.1%).
However, sales and relocation for ‘bigger and better premises’ appear to be declining steadily in prominence as economic and financial times continue to toughen, with the estimated percentage of sellers ‘looking for bigger or better premises’ having declined significantly to 8.2% in the second quarter of 2020, down from 18.4% in the prior quarter, and down from a high of 22.4% as at the third quarter of 2019.
Looking at each region, the greatest level of financial pressure-related selling or relocation is perceived to be the Gauteng regions, Greater Johannesburg being the highest at 69% of sellers, followed by Tshwane with 60%.
The three coastal metros appear better by comparison, Cape Town recording 52% of sellers perceived to be selling for financial pressure-related reasons, eThekwini 49%, and Nelson Mandela Bay 45%. However, all five regions’ percentages have risen (deteriorated) noticeably from the prior quarter.
While some may attribute the second quarter increase in the percentage of financial pressure-related sales and movement in the owner-serviced property market to the COVID-19 lockdown period, this may only be partially true.
There was a broad rising trend in the percentage through 2019, since the inception of this survey, which can be easily explained by three quarters of recession prior to the COVID-19 lockdown. Therefore, while lockdown may have begun to impact, it is quite possible that much of this second quarter increase was the lagged impact of prior economic weakness, and that there is significantly more increase to come in this percentage of financial pressure-related selling.
Read the full report here: