The work-from-home trend in South Africa is showing a significant decline in popularity, with property brokers increasingly optimistic about the future of office space.

This is according to FNB’s latest Commercial Property Broker Survey, which noted that near-term sales activity expectations strengthened in all three commercial property sectors – office, retail and industrial – in Q3 2023 as interest rates may have peaked.

Office space, which has long been the weakest performer in recent years, saw the biggest increase in expected sales activity for the next six months.

“Perhaps this is related to a ‘low base effect’, many brokers possibly believing that the Office Market can ‘only go higher’ off recently very low levels of sales and perhaps a Q3 increase in actual sales activity rating has buoyed confidence mildly,” FNB Property Strategist John Loos said.

“However, much of the expected rise in office sales activity in the near term may be merely due to a growing belief that interest rates have packed in the current cycle, with no further rate hiking since the SARB’s May MPC meeting and an expectation that the next move interest rates will be down.”

Work-from-home drop

In addition, according to Loos, the impact of working from home on office space downscaling has dropped in significance, even if it is still there.

Reflecting commentary from several industry reports covering the office sector, the survey showed that factors such as load shedding are denting remote work in the country – even though companies are still downscaling office space.

The troubled state of the economy was actually the most significant concern amongst brokers, even if this concern has also dropped.

36% of respondents said that “Economic and Political Uncertainty” was the main issue affecting their near-term activity expectations.

In this category, the key drivers were the weak economy (14%) and the need for a reliable supply of water and electricity (11%).

However, 29% of respondents said that “Channing Trading Conditions” will seriously affect near-term sales.

“Here, we again see some influence from both remote works well as load shedding, 11% perceiving companies still downscaling on office space requirements due in large part to greater levels of remote work, while on the other hand, 9% of respondents believed that load shedding was preventing effectivity working from home,” Loos said.

Although the key factors influencing perceptions are still negative, there are still aggregate expectations towards strengthening sales activity in the Office market.

Loos said that brokers have a “built-in bias” towards strengthening expectations. Hence, it is not uncommon for a host of negative factors to be listed and still see aggregated bias towards expectations of market strengthening.

“But what can also be said is that certain of the ‘negative factors’ for sales activity have receded in prominence in recent surveys, the percentage citing ‘Economic and Political Uncertainty,’ declining, as well as a decline in the perceived effect of work from home,” Loos said.

“Interest rates also appear to have peaked, and the interest rate hiking factor has diminished in prominence.”

“Therefore, improvised Office Market expectations may be more the result of perceptions of negative factors having diminished as opposed to an abundance of perceived positivity drivers of activity.”