This economic activity highlights where in South Africa businesses are suffering the most

 ·21 Sep 2020

The economic impact of the Covid-19 pandemic continues to have an impact on the commercial property sector as more businesses owners in South Africa are selling their premises to downsize because of financial concerns.

Focusing on the key drivers of movement and sales activity in owner-serviced properties, FNB’s Commercial Property Broker Survey for the third quarter found financial pressure to still be by far the biggest single driver.

The survey covered a sample of commercial property brokers in the country’s major metros including Johannesburg, Ekurhuleni, Tshwane, eThekwini, Cape Town and Nelson Mandela Bay.

Owner occupiers perceived to be selling or relocating influenced by financial constraints/pressures hit at 56.68% in the third quarter, almost 10 percentage points higher than 46.8% a year ago.

“Financial pressure continues to be the biggest driver in property sales. It became more pronounced during the second quarter when the national lockdown started and remained “elevated” in the third quarter survey,” said John Loos, property sector strategist at FNB Commercial Property Finance.

“We don’t have a long history yet to see exactly what a ‘good’ or ‘bad’ level of financial pressure-related selling is, but the recent readings do appear significant,” Loos said.

Additional reasons cited by business owners include looking for better access to transport or logistics, moving closer to the market, and looking for or attracted to reliable utilities.

Preliminary monthly data from credit bureau, TPN, for the percentage of commercial tenants in good standing with their landlords regarding rental payments, showed a significant drop.

From 72.76% of tenants being in good standing in March, the percentage declined to a lowly 47.98% by May, thereafter improving only marginally to 52.03% by July as lockdowns were eased.

FNB stressed that the economy was already on a path of long term stagnation prior to Covid-19, “and these financial pressure-related statistics were already appearing weak before the lockdown quarters,” it 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 72.5% of sellers, followed by Greater Johannesburg with 58.7%.

The three coastal metros appear better by comparison, Cape Town recording 53% of sellers perceived to be selling for financial pressure-related reasons, Ethekwini 47.4% and Nelson Mandela Bay 46%.

However, all 5 regions’ percentages remain elevated compared to just prior to lockdown, FNB said.

Read: South Africa does not have a viable economic recovery plan: analyst

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