Data and analysis from Lightstone Property has revealed the tough economic climate saw less transactional activity in the commercial property market last year.
Following 2017’s economic downturn there was renewed hope for this sector in 2018, but it did not materialise.
“Transactional activity unfortunately remains subdued and, as a result, business confidence has also decreased, recording the lowest number of transfers in the past three years for the third quarter of 2018,” Lightstone says.
“The continued debacle over land expropriation without compensation could also have a negative effect on all sectors of the property market, as talks of claims on commercial and retails have emerged.”
In an analysis of the South African commercial property market, the highest number of transactions in 2018 was made in the R2.5million-and-below range, with a spike in the volume of transactions seen in the latter part of 2017 leading into the first quarter of 2018.
Lightstone says it is “rather alarming” that the total value of transfers dropped to around R3billion in 2018, which is a loss of more than R1bn when compared to the same period in 2017.
“This is the most significant drop since 2016. Gauteng is still the zone experiencing the most transactions, followed by the Western Cape.”
In an “interesting finding” during the third quarter of 2018, retail property saw the most registrations between these three sectors with 525 transfers, closely followed by industrial property with 510 transfers and office property with 250 transfers. Although growth within the retail space has slowed there is still progress which is catalysed by consumer spending habits.
Lightstone says: “Annual nominal inflation for the industrial, office and retail markets indicates that industrial property is above the 6% mark, while retail is at 5% and office spaces at 4%.”
Looking at 2019, Lightstone says industrial property has shown demand and this can be attributed mostly to the development of the country's logistics sector.
“It is forecast the growth will continue into 2019 as expansions are planned for the logistics sector.
“In terms of property investments, the country will experience a similar trend in 2019 to what was seen in 2018.
“Subdued activity will ensue where companies will opt out of real estate investments until after 2019 general elections.
“Dependent on the election outcome, a slight uptick in activity can be expected.”