Indicators in the commercial real estate property market suggest that the industrial sector may be reaching a demand-supply balance but, this is not the case for the office or retail sectors with a perceived oversupply of stock.
According to FNB’s Property Broker Survey – Market Balance for Q1 2022, which includes a group of commercial property brokers in and around South Africa’s six major metros, the industrial sector’s relative market strength lies within the three coastal metros, eThekwini, Nelson Mandela Bay, and Cape Town, whereas Gauteng’s major metros, especially Greater Johannesburg, indicates relative weakness.
However, in the office sector, all major metro regions are perceived to be heavily oversupplied except for Cape Town which is perceived to be the least oversupplied.
FNB expects the industrial market to return growth in capital values during 2022 with the retail sector’s perceived oversupply to be diminishing. The office sector’s oversupply, however, is still major and further capital value decline for 2022 is anticipated.
The perceived trend in industrial property’s ‘shortening time’ on the market has improved over the past year or so with an average time on the market for occupied assets 17.8 weeks ‘quicker’ than the 21.68 weeks in the case of retail and 27.98 weeks for office space. Vacant industrial assets also averaged the shortest average time on the market (19.29 weeks) compared to 23.77 weeks in the case of retail space and 29.23 weeks in the case of office space.
However, the office and retail sectors have lagged industrial considerably, reflecting weak economic times and structural challenges.
When examining perceived oversupply by region, Gauteng, relative to the coastal metros, continues to raise a red flag. Greater Johannesburg is particularly weak in both retail and the industrial property sectors and the second weakest in the office market.