Businesses in this one South African metro are suffering more than in other areas

Fourth-quarter data from the FNB Commercial Property Broker Survey, which surveys a sample of commercial property brokers in the six major metros of South Africa, shows that the financial pressure on businesses continues to ease, but remains elevated when compared to pre-lockdown levels.

The improvement comes on the back of an economy slowly normalizing its activity as lockdowns have been gradually eased, said FNB property strategist, John Loos.

The data is drawn from brokers in the City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, City of Cape Town and Nelson Mandela Bay.

Financial pressure continues to be by far the biggest single driver of movement and sales activity in owner-serviced properties, the survey results show.

The latest quarterly reading pointed to a slow continuation of the declining trend, a sign that financial pressure is gradually alleviating as the economy slowly recovers from the deep lockdown-driven recession of 2020, said Loos.

The level of financial pressure-related selling continues its improving (downward) trend, he said.

Factors driving owner-occupiers’ movement and sales

FNB said that the levels of upgrade-related selling also point to an improving financial environment. Sales in order to relocate to “bigger and better premises” remains lower than pre-lockdown 2019 levels at 16.2%, the pre-lockdown first quarter of 2020 having recorded an 18.4% estimate.

However, FNB pointed out that this motive has shown some improvement from 13% in the previous quarter.

“This percentage has been significantly lower since the start of hard lockdowns in the second quarter of 2020. It had admittedly already declined in prominence as economic and financial times toughened prior to Covid-19 lockdown, but then declined far more noticeably in the 2nd quarter of 2020, to an 8.2% low, as lockdown caused the recession to go far deeper.

“The most recent percentage of 16.2% thus resembles a considerable improvement from the lockdown period, but perhaps still a more constrained financial environment compared to pre-lockdown days,” said Loos.

A further key reason for selling, which may reflect both current financial pressures on businesses as well as risk aversion due to uncertainty regarding the economic future, is the estimated percentage of sellers selling to move closer to their market.

This percentage rose for the first time in four quarters, to record 23.9% in the fourth quarter 2021 survey, up from the prior quarter’s 20%, the strategist said. The level remains low, however, when compared to the 36.3% recorded at the beginning of 2019.

Relatively low estimates regarding this motive for selling in 2021 suggested a “wait and see” approach by an increased portion of aspirant sellers, compared to prior years, said Loos.

“While it may often make sense to incur the cost of relocation closer to one’s market, in weak economic times less relocating and more staying put for the time being is the likely outcome. However, the latest survey’s increase may just point to the start of a more confident approach by owner-occupiers in this regard.”

Coastal metros appear to “outperform” Gauteng metros

Examining where, by region, the greatest level of financial pressure-related selling or relocation is perceived to be, Gauteng appears on average to have higher (worse) readings due largely to Tshwane region, said FNB. Tshwane was the highest in the fourth quarter 2021 survey at 78.5% of sellers, while Greater Johannesburg was a significantly lower 52%.

Of the three coastal metros, the highest (worst) percentage was recorded by Cape Town, i.e., 47%, eThekwini 38.3%, and Nelson Mandela Bay the lowest percentage of 28%.

Financial pressure-related owner serviced movement/sales activity

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