2023 may prove to be a slower year for commercial real estate when compared with 2022, despite interest rates possibly having reached their peak and anticipated to move sideways at the current level well into 2024.
In the FNB Commercial Property Broker Survey for Q1 2023, brokers in the office, retail, and industrial sectors indicated lower sales activity when compared with Q4 2022, pointing towards sales activity peaking in 2022 but showing signs of decline more recently.
In addition, the value of commercial mortgage loans granted, according to SARB data, recorded year-on-year declines in five of the last six quarters up to the end of 2022 with Q4 2022 showing a year-on-year decline of -5.67%, following MSCI’s data which shows the 2022 ‘All Property Total Return’ increasing from 4.9% in 2021 to 8.7% in 2022, the second consecutive year of increases following the 2020 lockdown recession dip.
‘All Property Capital Growth’ is forecast to return to negative territory in 2023, after a positive growth rate of 0.8% in 2022 with the ‘All Property Vacancy Rate’ forecast to rise mildly in 2023, following two years of decline and a higher ‘All Property Vacancy Rate’ in turn is likely to cause net operating income growth to slow from its 6.6% rate recorded in 2022.
