Industrial property tops as market continues to strengthen

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Greater optimism about industrial property is due in part to its greater affordability compared to retail and office property.
Greater optimism about industrial property is due in part to its greater affordability compared to retail and office property.
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  • Commercial property activity ratings in the first quarter showed a further strengthening on the previous quarter's readings.
  • This is according to the latest FNB Commercial Property Broker Survey.
  • Of the three commercial property classes, industrial shows higher activity levels than retail or office.


All three commercial property classes - industrial, retail and office - continue to show increased activity, according to the latest FNB Commercial Property Broker Survey.

In all three markets classes, the activity ratings in the first quarter showed a further strengthening on the previous quarter's readings, but in all market classes the levels have not yet recovered to those before the coronavirus lockdown, namely during the first quarter of 2020 survey.

The FNB survey looks at broker perceptions of buying and selling in the market during the first quarter of the year.

The industrial property market recorded the highest activity rating, namely 5.44 out of 10. The retail property market obtained an activity rating of 4.18, while the office property market was the weakest with a lowly 3.39 activity rating.

The brokers surveyed perceive all three sectors to have been heavily impacted by lockdowns and the resultant economic climate. However, their greater optimism about industrial property is due in part to its greater affordability compared to retail and office property.

In addition, they believe that an additional source of demand for industrial property is created by a greater move to online retail, necessitating increased warehousing and logistics space.

They don't regard retail property to be as challenged as office space by technological progress and online retail brought about by more people working from home, for example.

Over 40% of brokers surveyed see office-bound companies revising their office space needs and in many cases downscaling. Lower demand for office space appears not only to be due to more people working from home, but also because employment in the real estate and business services sector has dropped significantly.

On average, the brokers surveyed expect market activity for industrial property to increase the most over the next six months. A "more mild positive increase" is expected for the retail property market and a decline in office market activity.

"Recent economic numbers, therefore, suggest little further recovery progress early in 2021. Achieving further strengthening in commercial property market activity levels could thus be tough going, especially in the office market," states the report.

"The brokers surveyed now appear to see the office property market as becoming the underperformer of the three commercial property classes, with the retail property market recovering more noticeably after a very poor 2020."

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