Stats point to early signs of a slowdown in commercial building activity

The square meterage of total industrial, retail, and office space building plans passed declined by 66.25% year-on-year in February 2022, after a +103.85% growth spike in January. Levels of plans passed during February 2022 were -41.1% on February 2020's figures.

When viewing the broader trend on a 12-month moving total basis due to commercial property building statistics being known as volatile from month-to-month, FNB has seen a +11.15% year-on-year increase in the 12-month moving total to February 2022.

However, this represents a slower year-on-year growth rate than the +38.14% for the 12 months to January 2022, while the total plans passed for the 12 months to February is -11.4% down on the total plans passed for the 12 months to January.

Post-lockdown levels of building plans passed have remained well below pre-Covid-19 levels for the 12 months to February 2022 with square meterage of plans passed still -23.3% below the 12 months to February 2020 and -38.9% down on total building plans passed for the 12 months to February 2018.

Building completions also recorded a year-on-year decline in February 2022 of -26.52% after a slight +5.2% year-on-year increase in January. On a smooth 12 month moving total basis, square meterage completed was up by +11.24% year-on-year for the 12 months to February 2022, compared with a slight +0.05% increase for the 12 months to January 2022.

However, square meterage completed for the 12 months to February 2022 was still weak by pre-pandemic standards, being -41.5% down on the 12 months to February 2020 and -43.3% down on the 12 months to February 2018.

While total square meterage of commercial buildings completed for the 12 months to February 2022 saw an acceleration, stagnant growth in plans passed suggests that there may be some slowing in building activity and completions later this year.

Office space planning and completions remain the weakest of commercial property building levels, declining by -58.96% year-on-year in February 2022 off a very low base a year prior. For the 12 months to February 2022, square meterage of plans passed in this sector grew year-on-year by +35.85% off 2020's low base. However, this growth does not compensate for the earlier weakening during lockdown, remaining -39% down on the 12 months to February 2020 and -62.5% down on the 12 months to February 2018. The low level of planned new office space, despite some recent growth, is not surprising with the national office vacancy rate at 18.2% in 2021 according to MSCI.

Square meterage of retail space planned and passed for the 12 months to February 2022 was down -20.4% year-on-year. While this reflects weak growth for the 12-month period, significantly weaker than office's outcome, retail had less of a decline in 2020 than office space planning - a slightly lesser -30.4% down on the 12 months to February 2020 than office space. It is also a slightly lesser -57.7% on the 12 months to February 2018 than the decline in those year in the office sector.

Industrial building activity unsurprisingly remains the least weak. Besides being the most affordable property class of the three, it received a boost from greater online retail levels requiring an increased focus on logistics and warehousing, but its macro fundamentals remain weak, with manufacturing production remaining mediocre and economy-wide inventory levels still low due to years of economic stagnation. For the 12 months to February 2022, square meterage of industrial space plans passed were +20.35% up year-on-year. While this growth rate is slower than office sector growth over the same period, it does come off a higher base than office and retail due to a less severe lockdown dip. The industrial sector's new space planning for the 12 months to February 2022 was only -17.2% down on the 12 months to February 2020 and -20.3% down on the 12 months to February 2018, significantly less than office and retail.