The number of commercial property owner occupiers who are selling or relocating because of financial pressures continued to rise in the fourth quarter of 2020, commercial property data from FNB shows.
This is likely to be exacerbated as the report does not take into account the adjusted, level 3 regulations announced by president Cyril Ramaphosa in December, which were eased in a presidential address on Monday evening.
These stricter regulations over December and January are likely to have come at an even greater cost to business owners, already under pressure from initial lockdowns.
South Africa endured countless business liquidations and business rescue processes due to the pandemic, in 2020, particularly in the airline, entertainment related, tourism and travel industries.
The FNB Commercial Property Broker Survey used a sample of commercial property brokers in the six major metros of South Africa, ie. City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, Ethekwini, City of Cape Town and Nelson Mandela Bay.
Focusing on the key drivers of movement and sales activity in owner-serviced properties, the survey results show financial pressure to still be by far the biggest single driver.
This factor became noticeably more prominent in the second quarter 2020 survey as Covid-19 lockdowns hit, and has remained “elevated and rising” in the fourth quarter survey, noted John Loos, property sector strategist at FNB Commercial Property Finance.
FNB asked respondents for their perception of the major drivers of ‘movement and sales activity’ in the owner-serviced property segment. They estimate the percentage of movement and sales that they believe would take place for a particular reason.
The total percentage of all the reasons can add up to more than 100%, because businesses can be selling or relocating for more than one reason, Loos pointed out.
Commercial property owner occupiers under financial constraints climbed to 65.33% in the fourth quarter. This is a further rise from 56.7% in the third quarter, and 43.1% recorded in the first quarter of 2020.
Sales and relocation for ‘bigger and better premises’ remain at a lowly 12.9% in the fourth quarter survey. This is mildly higher than the 9% of the prior quarter, but it remains far below the 22.4% estimate from the third quarter of 2019, Loos said.
This percentage declined in prominence as economic and financial times toughened already prior to Covid-19 lockdown, but then declined far more noticeably in the second quarter of 2020 as lockdown caused the recession to go far deeper, the property strategist said.
Examining where, by region, the greatest level of financial pressure-related selling or relocation is perceived to be, it turns out to be the Gauteng regions, as was the case in the previous quarter, Tshwane being the highest at 77.5% of sellers, followed by Greater Johannesburg with 66.7%.
The three coastal metros appear better by comparison, Cape Town recording 60.4% of sellers perceived to be selling for financial pressure-related reasons, Ethekwini 60.3% and Nelson Mandela Bay 57%.
However, all five regions’ percentages remain elevated compared to just prior to lockdown, and all five rose in the fourth quarter of 2020.
“The latest survey results point to lagged economic and financial impacts of Covid-19 lockdown period persisting, as they are expected to do for a lengthy period of time,” said Loos.
They add support to the view that full post-lockdown economic recovery will be slow, he said.