Here’s why businesses in South Africa are selling up their properties right now

FNB’s Property Broker Survey for the second quarter finds that industrial property is the strongest segment of the three major commercial property classes which also include office and retail.

And within the industrial property market, it would appear that the three coastal metros have outperformed, especially Ethekwini Metro, while greater Johannesburg continues to struggle in the current low growth economy.

FNB surveyed a sample of commercial property brokers in and around the six major metros of South Africa, namely, City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, City of Cape Town and Nelson Mandela Bay.

Survey respondents from the Greater Johannesburg Region perceived the highest levels of owner-occupier property selling due to financial constraints, of any of the major metro regions, while those in Ethekwini Metro perceive the lowest level of such selling.

Average time on the market

According to FNB, in all three property classes, the occupied properties appear to sell slightly faster.

“Evidence of the industrial property market being the strongest of the three classes emerges here, with an average time on the market for occupied industrial properties of 21.2 weeks being shorter than the 22.77 weeks in the case of retail and 23.02 weeks for office space,” said FNB  property sector strategist, John Loos.

“Vacant industrial properties, too, averaged the shortest average time on the market to the tune of 24.97 weeks, compared to 29.08 weeks in the case of office space and 29.19 weeks in the case of retail properties.”

In addition, the average estimated time that industrial properties are on the market prior to sale has declined (signalling market strengthening) slightly from the first quarter to second quarter survey in the case of occupied properties. By comparison, the average times for both office and retail properties have actually risen – signalling market weakening.

And where is the real strength on a major metro regional basis?

It would appear to be in the three major coastal metros, namely Cape Town, Nelson Mandela Bay and Ethekwini with their 12.8, 12.8 and 10.5 weeks respectively for occupied properties, and 16.4, 15.3 and 13.1 weeks respectively for vacant industrial properties,” Loos said.

By comparison, the two Gauteng metro regions, namely Tshwane and Greater Johannesburg (Joburg and Ekurhuleni) appear significantly weaker, averaging 35 and 31.5 weeks respectively in the case of occupied industrial properties, and 39.7 and 35.8 weeks respectively in the case of vacant industrial properties.

Reasons for selling?

FNB asked respondents to give us their perception of the major drivers of selling of properties in the owner-occupier segment.

“They estimate the percentage of sellers that they believe would be selling for a particular reason, but the total percentage of all the reason can add up to far more than 100%, because sellers can be perceived to be selling for more than one reason,” Loos pointed out.

“It isn’t an exact science, but gives a broad picture, and what comes out of it is that the highest percentage of owner occupier sellers are perceived to be selling due to financial constraints/pressures,” he said.

“This would appear to be very significant, and is followed by selling in order to relocate to a place with better transport, logistics and commuter nodes (31.2%), and sellers moving closer to their markets (31.05%).”

Examining where, by region, the greatest level of financial pressure-related selling of properties is perceived to be, it turns out to be Johannesburg, with 49.33% of sellers, while Ethekwini metro’s respondents perceive that metro to have the lowest level of financial pressure-related property selling among owner-occupiers.

Read: Work on a new R76 billion North Coast mega-development is underway