Industrial and warehouse segments driving commercial rentals market

ACTIVITY in the commercial rental property market remains highest in the industrial and warehouse segments, a commercial property broker survey for the first quarter released yesterday by FNB showed.

Industrial and warehouse property market respondents drove the activity rating in this segment to 6.51 points compared with 4.5 points in the “lockdown” second quarter of 2020.

It was the third consecutive quarter in which this sector’s activity rating has increased. The retail sector also saw a strengthening in its market activity rating, to 5 points in the first quarter from 3.62 points in the second quarter of 2020.

However, in line with other data, the office sector’s activity rating declined to 3.49 points from 3.70 points in the hard lockdown, leaving it as the sector with by far the lowest rating of the three major commercial property sectors.

The survey sampled the views of commercial property brokers in the six major metropolitan areas. Brokers rated rental market activity on a scale of 1 to 10, with 10 the strongest level of activity. While the industrial and retail activity ratings have both improved post-lockdown, only the industrial sector managed to recover to a rating above pre-lockdown levels in the first quarter of this year.

The aggregate perception of rising vacancy rates was still only strong in the office sector.

The biggest factor influencing office property expectations was how companies revised their need for space as remote working increased in importance, but the recession-related decline in employment was also a factor.

In retail property, brokers pointed to a significant level of new business start-ups, while few pointed to online retail as a key issue.

Average office rentals were expected to continue to decline in the short term.