DEVELOP & INVEST
South Africa ’ s central bank raised the repurchase rate by 50 basis points to 4.75 % in May this year , which was the biggest hike in rates since January 2016 . The SARB had hiked rates by 75 basis points in total prior to the second quarter survey , and its 50-basis point increase is likely to influence the third quarter broker survey .
FNB said there were several reasons behind the hike in interest rates , including the war in Ukraine , global supply chain disruptions , and inflation .
Industrial sector performance
Respondents of the survey were only upbeat when it came to the industrial property market , which saw activity rise from 6.2 in the previous quarter to 6.35 in this quarter . The industrial property market sales activity rating has recorded its highest activity reading since the start of FNB ’ s survey in early 2019 .
John Loos , property sector strategist at FNB Commercial Property Finance , said : ‘ While this property class is not seeing strong economic performance in the related manufacturing sector , we believe it is benefiting from being the most affordable and adaptable property class in tough financial times , as well as from an increasing need for logistics and warehousing due to greater levels of online retail emerging .’
According to property consultants Rode & Associates , more than 300,000 square metres of new leasable retail space will be completed across the country this year , compared with the 367,000 square metres that were completed over the last two years combined .
New malls include Oceans Mall in Durban , KwaBhaca Mall in the Eastern Cape , and Mamelodi Square in Pretoria .
Commercial property highs and lows
There are several reasons why the industrial property sector is seeing a boost . Geopolitical risk , supply chain shortages , the boom in online retail sales and the ramping up of the industrial and logistics market are the main drivers behind the need for industrial warehousing space . This has not only been identified in South Africa , but globally too .
Retail and office market problems
But not all commercial property sectors are enjoying an increase in activity , and this may well influence where developers in this space concentrate their efforts over the next few months and years .
Certainly , the office and retail sectors show current and future problems looming . According to FNB , the retail sector is struggling because of the ‘ financially pressured consumer ’, while the office market is being challenged by weak levels of service sector employment and by remote working , which has been on the rise since COVID-19 restrictions eased .
While confidence , particularly in retail and office , is on a slow downward trajectory among brokers , this wasn ’ t the case earlier in the year , demonstrating how swiftly things can change .
According to the survey , broker business confidence had been improving until early 2022 , probably because the threat of COVID-19 was receding and restrictions were lifting .
But not long after , it had been thwarted by economic head winds , which include inflation and the Russia-Ukraine conflict .
So , is this optimism likely to return any time soon ? Not according to FNB . While there had been some positivity around the industrial property market , this is unlikely to last well into 2022 . What ’ s more , FNB expects a decline in sales activity across all three classes of property in the second half of the year .
Only time will tell if the experts and brokers surveyed are right .
29 T R E N D S
But according to some , South Africans ’ love of shopping malls is hardly about to slow despite the pressures on their wallets . According to a report on swissinfo . ch , some leading developers are doubling down expansion plans to the tune of R1 trillion in the retail market .
Angelique Ruzicka