FNB’s 3rd quarter commercial rental market survey

FNB’s 3rd quarter commercial rental market survey

Private Property South Africa
Sarah-Jane Meyer

The FNB Commercial Property Broker Survey for the third quarter of 2021 surveyed a sample of commercial property brokers in and around South Africa’s six major metros.

These are:

  • City of Joburg
  • Ekurhuleni (Greater Johannesburg)
  • Tshwane
  • Ethekwini
  • City of Cape Town
  • Nelson Mandela Bay.


“Similar to our buying and selling survey component, the rental market survey component still shows the highest levels of optimism among the industrial and warehouse property market respondents,” says John Loos, Property Sector Strategist at FNB Commercial Property Finance.

In this segment, the activity rating rose from 4.5 in the lockdown second quarter to 6.58 in the third quarter of 2021 survey.

"However, during 2021 this sector’s activity rating has made little strengthening progress since the 6.51 reading of the first quarter of this year.”

The retail sector market activity rating also strengthened - from a 3.62 low in the second quarter of 2020 to 5.31 by the third quarter of 2021. This was the fifth consecutive quarterly increase for this sector.

The office sector’s activity rating rose less significantly - from 3.70 during the hard lockdown second quarter of 2020 to 4.03 for the third quarter of 2021. This leaves the office sector with by far the lowest rating of the three major commercial property sectors.

Although industrial and retail activity ratings have both improved since the start of the lockdown, only the industrial sector, has recovered to above its pre-lockdown level in the first quarter of 2020.

Vacancy trends

Brokers were asked whether their vacancy rates have risen, remained the same, or declined over the past six months.

The office property sector was perceived to be by far the weakest major property class, with just over 40% of respondents perceiving vacancies to have been rising in the previous six months, compared to those perceiving a decline.

“This is still a very strong bias in favour of rising vacancy rates, despite being a significantly lower reading than for the 2020 hard lockdown quarters,” says Loos.

The retail property sector has an almost neutral bias, and industrial property is the only property class that has shifted to a noticeable declining vacancy rate bias during the third quarter of 2021.

Industrial property

“Although brokers see a relatively strong industrial market, economic fundamentals underpinning that market are questionable,” says Loos.

“The strength in the industrial property market and perception of declining vacancy rates is interesting, given that the economic sector’s key to influencing industrial property performance have not all been returning strong data.

For the second quarter of 2021, manufacturing Gross Value Added (GVA) growth was a massive 42.2% year on year.

"However, that growth figure is meaningless as it was due to a very low base from last year’s second quarter hard lockdowns. You can better see the manufacturing stagnation of recent years when comparing the second quarter of 2021 real manufacturing GVA to the more normal second quarter of 2019, before COVID-19. This is where it was still a significant -6.3% lower than two years before that,” says Loos.

“The stagnant manufacturing sector of recent years seems to offer little in the way of strong support for the manufacturing component of industrial property.”

He says that manufacturing capacity utilisation was at a low 78.6% in the second quarter of 2021 - down from 83.1% in 2018 and far below the levels of around 87% in the pre-2008 economic boom years.

Building activity

Loos says that one positive factor in containing the potential build-up of industrial property oversupply would be a low level of new industrial property building activity.

“Indeed, this is the case compared to the pre-2008 boom years or even 2018/19. But there has been a recent increase in industrial space plans passed and completed, which could signal possible future oversupply if economic fundamentals related to industrial property don’t improve more meaningfully."

“Perhaps the brokers are experiencing early signs of the start of a re-stocking of inventories through the economy, driving manufacturing back into positive growth territory, resulting in expansion plans by some."

The one up to date leading indicator pointing to some strengthening is the manufacturing purchasing managers index (PMI) new sales orders sub-index.

"This has been at a solid level in recent months, recording a healthy reading of 59.2 in September 2021. This is well into expansionary territory."

“The property broker survey for industrial property may be reflecting what the most recent manufacturing PMI readings have been telling us - that better times are on the horizon.”

Covid-19 impact

Loos says that Covid-19 still features prominently on the list of issues affecting the commercial property sector.

Office sector:

  • 37.84% of respondents still see companies re-evaluating office space needs. In many instances, they are either downscaling the amount of office space required or are planning to do so, as more employees are working from home.
  • 10.81% of respondents point to the negative economic fallout from Covid-19 on office-bound companies, contributing to weaker demand for office space.
  • 8.11% of respondents also point to an increased expectation of interest rate hikes as a negative demand factor for office space.
  • 10.81% of brokers perceived rentals as becoming more realistic to retain and attract tenants.
  • 8.11% pointed to businesses preferring to lease rather than to buy.
  • 8.11% believed that companies want their staff back in the office for greater productivity.

Industrial property

  • 20% of brokers point to a desire of many businesses to lease rather than to buy, which may be due to expected interest rate hiking and current economic uncertainty.

  • 17.5% of respondents pointed to expected small business demand for space. This could make sense given its relative affordability in tough economic times, and the fact that it is the most adaptable property class.

  • 12.5% perceived manufacturing to be picking up due to fewer imports.

  • 17.5% perceived rentals being reduced to attract and retain tenants, seeing this as a positive for demand for space.

  • 17.5% - mainly from KZN - perceived a frenzy of demand for space, creating stock shortages, following the recent massive looting and unrest-related damage to property.

  • Only 5% of respondents point to an increased need for warehouse space as online retail grows. This is surprising given the hype around the emergence of online retail.


  • 20.69% of brokers perceive changing trading conditions. This includes a combination of small businesses coming into the retail market looking for space, and new entrepreneurs starting up.
  • Only 3.45% see increasing online retail as a dampening force for space demand.
  • 13.79% of respondents see rentals being reduced to keep or attract tenants.
  • A sizeable 17.4% of retail property brokers still perceive a negative impact on space demand to ensue from the recessionary fall-out from Covid-19 lockdowns and disruptions.
  • 10.34% of respondents - mainly from KZN - see the recent unrest and looting as having put a dampener on retail space demand.


Brokers surveyed in the third quarter 2021 FNB Property Broker Survey generally perceived strengthening in all three main commercial property sectors’ rental market activity levels from the previous quarter.

Industrial property is the only one to have surpassed the pre-lockdown level of the first quarter of 2020. Industrial property brokers as a group perceive vacancy rates to have declined over the prior six months. This is not yet evident for the retail market, and they still perceive a strong rising vacancy rate trend for the office market.

When it comes to near-term market activity expectations, the broker group is moderately biased towards strengthening for all three property categories. However, the brokers are generally concerned about the impact of Covid-19 on the economy and the property market.


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