A survey of first quarter property sales activity shows that brokers expect a further rise in business confidence, along with improved sales activity across all three major commercial property classes.
Interest rate cuts appear to be the main demand stimulus, writes John Loos, senior economist at FNB Commercial Property Finance.
The FNB Commercial Property Broker Survey assesses a sample of commercial property brokers in and around the six major metros of South Africa: City of Johannesburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, City of Cape Town, and Nelson Mandela Bay.
Given FNB Commercial Property Finance’s strong focus on the “owner-serviced” market, a prerequisite for selecting broker respondents is that they must at least deal in owner-serviced properties. However, a portion of respondents also engages in the developer or investor markets, as well as in the listed sector.
The report focuses on the section of the survey where respondents rate their perception of the buying and selling market’s (so not the rental market) activity levels on a scale of 1 to 10, with 10 being the strongest activity level rating.
Broker Business Confidence Increases
Before assessing activity level perceptions, all respondents were asked whether they find business conditions “satisfactory” or not, using a simple “yes” or “no” answer. In the first quarter of 2025, the percentage of respondents who viewed conditions as satisfactory rose noticeably from 46% in the previous quarter to 55%, marking the third consecutive quarter of increase.
This further rise in business confidence comes from a survey conducted in February 2025, following a 25-basis-point interest rate cut by the South African Reserve Bank (SARB) in January — the third in a series of rate cuts that began in September 2024.
Encouragingly, for the first time since early 2023, the percentage of brokers perceiving business conditions as “satisfactory” has risen above the 50% mark, indicating that the majority now hold a positive outlook.
The rebound in property broker business confidence slightly outperforms business confidence in the broader economy, as reflected in the RMB-BER Business Confidence Index. This index also improved in late 2024 but stood at 45 (on a scale of 0 to 100) in the first quarter of 2025 — still below the crucial 50 mark.
While interest rate cuts are believed to have played a key role in boosting confidence, some mild economic growth in late 2024 may have also contributed. Following a -0.1% quarter-on-quarter contraction in GDP in the 3rd quarter of 2024, GDP growth turned positive at 0.6% in the final quarter of the year.
Sales Activity Ratings by Major Property Class
When brokers were asked to rate market activity levels on a scale of 1 to 10, the average rating increased across all three property classes compared to the previous quarter’s survey:
- Industrial and Warehouse Property Market: Increased from 5.11 in the previous quarter to a notably stronger 5.69.
- Retail Property Market: Rose moderately for the second consecutive quarter, from 4.57 in Q4 2024 to 4.79 in Q1 2025.
- Office Property Market: Rebounded significantly in recent quarters, surpassing the retail property rating by a small margin. The activity rating rose from 4.55 in Q4 2024 to 4.95 in Q1 2025, marking the third consecutive quarter of increase.
Broker Perceptions Compared with Six Months Earlier
Each quarterly survey selects a different sample of brokers from the property industry. Therefore, although brokers provide quarterly activity ratings, a follow-up question asks whether they perceive a change in activity levels over the past six months.
Responses are categorised as “increased,” “unchanged,” or “decreased.” An index is then compiled by allocating:
- +1 for each percentage point of “increased” responses,
- 0 for “unchanged” responses, and
- -1 for “decreased” responses.
The resulting index, on a scale of +100 to -100, showed:
- Office Property Market: +32.2
- Industrial Property Market: +23.44
- Retail Property Market: -2.08 (a slight decline)
These results align with recent sales activity ratings in the Office and Industrial Markets, the actual activity ratings having recorded higher levels than those recorded in the previous quarter. However, the Retail Property Market directional index may appear in slight contradiction with a sales activity rating that turned out to be higher than those of prior quarter.
The important point, though, is that the brokers provide both a sales activity rating, as well as a response on the perceived direction of sales, which is the weakest of the three markets.
Strengthening Market Driven by Interest Rate Cuts
The first Quarter 2025 FNB Property Broker Survey suggests an overall strengthening in commercial property sales activity, supported largely by recent interest rate cuts.
Sales activity ratings improved in all three major commercial property markets (Office, Industrial, and Retail).
- The Office Market, for the first time in recent years, recorded a sales activity rating slightly higher than the Retail Market.
- Broker perceptions indicate that the Industrial and Office property markets strengthened compared to six months prior.
- Interest rate reductions, with further mild cuts expected, appear to be the primary driver behind improved investor sentiment and increased sales activity.
Market-Specific Observations
Industrial Property Market: Continues to be perceived as the strongest sector, thanks to historically lower vacancy rates and stronger investment returns. The sector benefits from growth in warehousing and logistics, fuelled by the rise of e-commerce. However, a recessionary Manufacturing Sector presents a challenge to the manufacturing segment of industrial property.
Office Property Market: Showed a notable recovery from a low base, supported by declining vacancy rates, repurposing of older office spaces into residential units, and renewed investor interest due to lower interest rates.
Retail Property Market: Continues to face challenges but has shown mild improvement. While brokers rate it the weakest among the three sectors, sales activity is on an upward trajectory.
Looking Ahead
We anticipate mild economic acceleration and higher property sales activity in the near term, driven by continued global and local interest rate cuts in 2025.
However, new global risks have emerged, particularly due to changes in U.S. trade policy under President Trump. Increased U.S. import tariffs on certain countries and threats of additional tariffs could lead to a global trade war, potentially derailing economic growth and fuelling inflation. Should inflation rise again, interest rate hikes could follow, impacting global and local investor sentiment. These are key risks to our forecasts.