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Commercial property market sentiment in line with business confidence index

Posted by Hugo van Schalkwyk on 11/07/2022

It’s no secret that the commercial property market remains under pressure. This is reflected
in the fact that the sector is struggling to break through the 70% mark of tenants in good
standing and a marginal decrease in the number of commercial tenants in good standing
compared to the previous quarter. Tenants in good standing are those that have paid their
rental in full and on time at the end of each month.

The RMB/BER Business Confidence Index noted an improvement between Q4 2021 and Q1
2022 from 43 to 46. The small uptick in business confidence – which remained below the
neutral 50-mark reached in the second half of 2021 – was supported by the decrease in the
number of discouraged job seekers which reduced by 1.4% in Q1 of 2022.
According to Statistics SA, 370 000 new jobs were recorded in the first quarter, reducing the
number of the unemployed to 34.5%, while the expanded definition of unemployment
decreased by 0.7% to 45.5%. As demand for commercial property struggles to recover, the
construction sector echoed this trend by shedding 60 000 jobs in Q1 of 2022.
Bear in mind, however, that the RMB/BER Business Confidence Index Survey for Q1 was
conducted in February 2022 before Russia invaded Ukraine and before the oil price surged
past $120 per barrel. Not surprisingly business confidence has eroded in Q2 as inflation and
rising interest rates place South African consumers under further pressure. The RMB/BER
Business Confidence Index reflects this pressure, dropping from 46 to 42 in Q2, reverting
back to the low levels seen in the second half of 2021.

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