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Picture: 123RF
Picture: 123RF   

SA’s office property market is facing a deep slump due to an oversupply and dwindling demand for stock, according to the latest FNB commercial property broker survey for the second quarter of 2024.

The survey, which assesses the demand and supply balance in the country’s major metros, recorded a negative demand and supply index reading of -68.5, highlighting the pervasive market imbalance across all major metros, except Cape Town.

Despite a series of interest-rate hikes from November 2021 to May 2023 totalling 475 basis points, and sluggish economic growth, the office property market remains weak. The report found that properties now linger on the market for longer, with occupied offices averaging 24.5 weeks and vacant ones extending to 25.19 weeks.

This contrasts with the retail and industrial property markets, which are showing signs of strengthening and shorter market times.

Regionally, the cities of Johannesburg and Tshwane are the weakest, with Johannesburg posting a negative demand and supply balance of -156.28. Nelson Mandela Bay and eThekwini also recorded oversupply, while Cape Town stands out with a positive demand-supply balance of 75.25.

Building-planning activity for office space is sluggish. The report shows that the square meterage of office building plans passed for the 12 months ending April 2024 was 71.4% lower than the multiyear high reached in June 2017.

Cape Town is the beacon of strength for the strained market, outperforming the city of gold. The survey reveals strong performance in the retail and industrial property markets, driven by resilient demand and a favourable supply-demand balance.

The retail property market boasted a demand-supply index reading of 32.61, while the industrial property market followed closely with a reading of 21.22. Properties in Cape Town were spending less time on the market compared to national averages, with occupied industrial properties averaging just 13.48 weeks and retail properties 16.65 weeks, the survey found,

Despite overall building planning activity remaining below pre-pandemic levels, the industrial sector in Cape Town has shown resilience, with a smaller decline in new building plans compared to other sectors. The retail sector also demonstrated similar resilience, pointing to sustained demand in those segments.

FNB’s property sector strategist, John Loos, anticipates an improvement in market demand and supply balances in the second half of 2024.

Loos said that his optimism was based on stable interest rates since May 2023, with an expected decrease later in 2024, declining global inflation, anticipated declines in global interest rates and reduced load-shedding in early 2024.

“On top of this, the government of national unity formed between the ANC, DA and IFP, along with a number of smaller parties, appears to have been perceived as ‘investor positive’,” he said

“All of this could conceivably cause some strengthening in property investor demand and improve market balances later in 2024.”

GobaN@businesslive.co.za

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