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FNB Commercial Property Broker Survey – 2nd Quarter 2022
Property Sales Activity Survey has begun to show some weakening in 2 of the 3 property classes, possibly the impact of rising interest rates feeding through.

Key Points

  • The 2nd Quarter of 2022 FNB Commercial Property Broker Survey saw 2 of the 3 major commercial property sectors, i.e., Office and Retail, showing declines in perceived market sales activity levels, with only the Industrial Property Market’s Activity Rating rising further.


  • The percentage of broker respondents perceiving business conditions to be satisfactory declined slightly in the 2nd quarter survey from 47% in the prior quarter to 46%. This decline comes after a prior rising trend, remaining at a mediocre level. This reflects an economy battling to fully recover from the very deep recession of 2020, and more recently pressured by rising interest rates.


  • When asking brokers for their ratings of market activity levels on a scale of 1 to 10, we see that the group of respondents is still most upbeat about the Industrial and Warehouse Property Market. The Industrial Property Market’s 2nd quarter 2022 Activity Rating rose from 6.2 in the prior quarter to 6.35. The Retail Property Activity Rating declined, from 4.87 to 4.60 over the same 2 quarters. The Office Property Market Activity Rating remained the weakest of the 3, also declining from 4.26 to 3.72.


  • Rising interest rates may have begun to “dampen the spirits” of the market. Prior to the 2nd quarter survey, sales activity ratings had been on a rising trend in all 3 property classes following the easing of Covid-19 lockdowns. We believe that this “normalisation” from a Covid-19 point of view may have had a positive impact on the economy as well as property markets. But global supply chain disruptions had been contributing to building global inflationary pressures, and more recently war in the Ukraine, and resultant sanctions and boycotts on Russia, have further exacerbated the problem. The result has been 125 basis points’ worth of interest rate hikes by the SARB since late-2021, while a further 100 basis points’ worth of hikes are expected this year. Future broker surveys will give us insight as to whether these events will dampen the commercial property market further or not, but we would expect to see some weakening in the near term.


The Methodology

The FNB Commercial Property Broker Survey surveys a sample of commercial property brokers in and around the 6 major metros of South Africa, namely, City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, City of Cape Town and Nelson Mandela Bay.

Given FNB Commercial Property Finance’s strong focus on the “Owner-Serviced” market, a pre-requisite in selecting broker respondents is that they at least deal in owner-serviced properties, but a portion will also have dealings in the developer or investor markets as well as in the listed sector.

In this report we focus on the part of the survey where we ask respondents to rate their perception of the buying/selling market’s (i.e., not rental market) activity levels on a scale of 1 to 10, 10 being the strongest activity level rating.

The term “activity” is as experienced by a property broker, and includes everything from indications of interest in buying or selling, e.g., inquiries or viewings related to potential buying or listing, through to actual transaction levels.

Broker Business Confidence weakens mildly in the 2nd quarter of 2022.

Before we survey activity level perceptions, we ask all respondents to say whether they find business conditions “satisfactory” or not in the form of a simple “yes or no” answer. In the 2nd quarter of 2022, the percentage of respondents experiencing conditions as satisfactory was slightly lower than the previous quarter, declining to 46% from a previous 47%.

This decline is not yet significant, but after earlier quarters of very significant increase in this percentage, it suggests that broker confidence improvements have run out of steam, and at this level still implies that 54% of respondents are dissatisfied with conditions.

This survey response gives a perspective of business confidence in the Commercial Property Sector, which may be starting to reflect the recent business confidence trend for the broader economy, the latter having weakened since a few quarters ago.

The RMB-BER Business Confidence Index for the 2nd quarter of 2022 showed a similar 42% of survey respondents across the economy expressing satisfaction with business conditions, and this was a weakening from the prior quarter’s 46 reading.

Activity Rating by Major Property Class – 2 of the 3 markets showed a weakening

When asking brokers for their ratings of market activity levels on a scale of 1 to 10, the group of respondents’ average rating was lower in 2 of the 3 property classes compared with those of the previous quarter’s survey.

The brokers remain most upbeat about the Industrial and Warehouse Property Market. This market’s 2nd quarter 2022 Activity Rating rose further from 6.20 in the previous quarter to 6.35.

After some prior quarters of noticeable strengthening, however, the Retail Property Activity Rating dropped back from an 8-quarter high of 4.87 in the 1st quarter to 4.60 in the 2nd quarter.

The Office Property Market Activity Rating remained the weakest of the 3 property classes, also dropping back off its 8-quarter high of 4.26 in the 1st quarter to 3.72 in the 2nd 2022 quarter survey.

A feature of the 2nd quarter survey is that the Industrial Property Market Sales Activity Rating has recorded its highest activity reading since we started this survey at the beginning of 2019, being the only one of the 3 classes to strengthen further in the most recent survey.

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.

The Retail and Office Activity Ratings, by comparison, have still not yet achieved a rating higher than their pre-Covid 19 lockdown readings for the 1st quarter of 2020. Retail is still constrained by a financially pressured consumer, while the Office Market sees challenges from weak levels of services sector employment as well as greater levels of remote work compared with the pre-lockdown era.

And recently, it appears that the series of SARB interest rate hikes that started late in 2021 have begun to take their toll at least on the Retail and Office Property Markets, the slowdown just starting in the 2nd quarter.

The SARB had hiked rates by 75 basis points in total (3×25 basis points hikes) prior to the 2nd quarter survey, while a further 50 basis point rate hike in May will likely influence the outcome of the 3rd quarter 2022 broker survey.


The 2nd quarter broker sample perceives either “less strengthening” or alternatively “weakening” in all 3 markets over the past 6 months.

Each quarterly survey selects a different sample of brokers from the Property Industry. Therefore, although we ask for quarterly activity ratings, we ask a follow up question as to whether the current quarter’s respondents perceive a changed activity level over the 6 months leading up to the survey date.

The follow up question asks whether the respondents have perceived a decline, increase or no change in activity levels compared with 6 months prior. From these results we compile an index, allocating a score of +1 to each percentage points’ worth of “increased” responses, zero to that of “unchanged” responses and -1 for that of “decreased” responses. The index is thus on a scale of +100 to -100.

In the  2nd quarter 2022 survey, by this measure even the Industrial and Warehouse Market showed signs of losing strengthening momentum, its index reading having weakened further from the prior quarter’s mildly positive +6.20 to zero.

This implies that the respondents perceiving a strengthening in activity in this sector over the prior 6 months exactly equals those that perceived weakening.

The Retail Market returned a small negative reading, to the tune of -8.33, which is also lower than the previous quarter’s +4.87.

The Office Property Market reading was mildly positive at +4.41, almost the same as the prior quarter’s +4.26 while down on the +11.87 “high” of 2-quarters prior.

These indices in all 3 markets thus point to very little activity growth momentum having been perceived of late, interest rate hiking this year possibly having been the main cause of demand growth “running out of steam”.

Conclusion – 3 interest rate hikes prior to the survey taking place may have begun to dampen the market spirits.

The 2nd quarter 2022 FNB Property Broker Survey Activity Ratings began to weaken in 2 of the 3 major commercial property classes, the Industrial Property Market being the sole one strengthening.

We believe that the interest rate hiking that started late last year has likely been a key influence in starting to “dampen the market spirits”.

Broker business confidence had been improving until early in 2022, arguably driven by a sense that the Covid-19 threat was receding, lockdowns being relaxed significantly further, and economic life largely getting back to “normal”, whatever “normal” is these days.

But while economic and social life is largely back to normal, a positive for the economy following the lockdown era, some economic headwinds had been building too.

Consumer price inflation, notably from a recent fuel price inflation surge, has become more troublesome, not only eating into consumer incomes but also causing the SARB to commence interest rate hiking late last year.

While commercial property demand is arguably less sensitive to interest rate hiking than residential property, there comes a point where those hikes do begin to have an impact. That point may have been reached. And FNB expects a further 100 basis points’ worth of interest rate hikes before this year is over.

The inflation problem that drives interest rates higher is a global issue. Global supply chain issues caused by Covid-19-related disruptions had become inflationary some time ago. More recently, the disruption of the Russia-Ukraine conflict on food and energy markets, along with a hist of Russia sanctions and boycotts, has exacerbated the situation.

We would thus expect to see some decline in the sales activity ratings across all 3 property classes in the 2nd half of 2022.

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