Business confidence among commercial property brokers declined in the second quarter of 2025 of 2025, reversing the upward trend observed in previous quarters.
This is one of the findings from The FNB Commercial Property Broker Survey, which assesses a sample of commercial property brokers operating in and around South Africa’s six major metros: the City of Johannesburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, the City of Cape Town, and Nelson Mandela Bay.
Before assessing market activity levels, brokers are asked whether they find current business conditions “satisfactory” via a simple yes/no response. In Q2 2025, the percentage of brokers who perceived conditions as satisfactory dropped from 55% in the previous quarter to 40%. This marks the end of three consecutive quarters of improvement.
All three major property classes recorded a decline in activity ratings this quarter:
- Industrial and Warehouse Property remains the strongest-performing market, although its activity rating declined slightly from 5.69 in Q1 to 5.59 in Q2.
- Retail Property Activity fell from 4.79 in Q1 to 4.47 in Q2.
- Office Property Activity declined from 4.95 in Q1 to 4.67 in Q2.
These figures represent a reversal from the previous quarter, where all three sectors saw improved activity ratings.
As a result, the Q2 2025 FNB Property Broker Survey suggests that both business confidence and perceived market activity have weakened, indicating a broader sentiment of caution in the commercial property space.
The survey was conducted in May 2025, shortly after the South African Reserve Bank (SARB) chose to hold interest rates steady in March, following three consecutive 25 basis point cuts at earlier Monetary Policy Committee (MPC) meetings. Although the SARB resumed its rate-cutting cycle in late May, the temporary pause may have dampened sentiment among brokers and their clients.
Additional factors influencing negative sentiment include:
- Instability within the Government of National Unity (GNU) regarding national budget negotiations, raising concerns about the coalition’s longevity.
- Tense diplomatic relations between South Africa and the US, with President Trump threatening trade tariffs and accusing South Africa of human rights violations and hostility toward the U.S. and its allies. This led to the closure of USAID in South Africa and fears of increased tariffs on exports — potentially impacting the economy.
- Slower economic growth, with Q1 GDP expanding only 0.1% quarter-on-quarter, down from 0.4% in Q4 2024 — suggesting early that 2025 may be constrained in terms of business growth and investment.
Despite the current decline, FNB expects a mild recovery in property sales activity in the second half of 2025. Full-year activity is forecast to outperform 2024 levels, driven by:
- An anticipated 25 basis point interest rate cut in H2 2025, supported by a low May inflation rate of 2.8% y/y — below SARB’s lower target threshold of 3%.
- Positive signs from leading economic indicators such as: SARB’s Business Cycle Leading Indicator (March), which rose 4,1% year-on-year and 1,1% month-on-month; new passenger vehicle sales, which surged 30,3% year-on-year in May; and residential mortgage demand, which had reached 16,2% y/y growth by Q4 2024 (though data for early 2025 is still pending).
Based on these indicators and a looser interest rate environment, FNB forecasts GDP growth of 1,1% for 2025, compared to 0,5% in 2024.
However, not all signs are optimistic. The Manufacturing PMI’s new sales orders index recorded a low 38.3 in May (on a 0–100 scale), indicating continued pressure in this critical sector.
Despite weaker sales activity, brokers continue to report declining vacancy rates across all three property classes. Lower vacancy rates are typically associated with stronger rental growth and improved net operating income, which may attract more investors seeking higher returns.
While Q2 2025 showed a dip in confidence and activity across the board, FNB remains cautiously optimistic. Given the expected macroeconomic tailwinds and improving indicators, a modest rebound in commercial property sales activity is anticipated in the latter half of 2025.