Business confidence among SA’s commercial property brokers declined sharply in the second quarter of 2025, ending a three-quarter streak of improving sentiment and signalling increased caution in the market amid mounting economic and political uncertainty.
According to the latest FNB Commercial Property Broker survey, the percentage of brokers describing prevailing business conditions as “satisfactory” fell from 55% in the first quarter to 40% in the second. The fall comes against a backdrop of subdued economic growth, political instability and escalating diplomatic tension with top international partners.
Sales activity across all three major commercial property sectors weakened during the quarter. Industrial and warehouse property — traditionally the strongest-performing segment — saw its activity rating fall from 5.69 to 5.59. Retail property activity dropped from 4.79 to 4.47, while office property fell from 4.95 to 4.67. The falls reversed gains recorded in the first quarter and reflect a growing sense of unease among brokers, investors and tenants alike.
The survey was conducted in May, shortly after the SA Reserve Bank paused its interest rate cutting cycle in March, after three successive 25 basis point (bps) cuts. Though the Bank resumed cuts later in May, the temporary pause may have negatively affected confidence levels, introducing uncertainty into interest rate expectations.
In addition to monetary policy, several local political and geopolitical risks have weighed heavily on sentiment. Internal tension within the government of national unity over national budget negotiations raised concern over the coalition’s durability.
Strained diplomatic relations between SA and the US intensified after US President Donald Trump accused SA of human rights violations and anti-Western posturing. The fallout included the closure of US Agency for International Development (USAID) operations in SA and threats of increased tariffs on SA exports — developments that have shaken investor confidence and cast a shadow over trade prospects.
The domestic economy has also struggled to gain traction. GDP grew by just 0.1% in the first quarter of 2025, down from 0.4% in the final quarter of 2024. Manufacturing remains under pressure, with the purchasing managers’ index new sales orders index falling to 38.3 in May — well below the neutral 50-point threshold, signalling contraction.
Despite these headwinds, FNB maintains a cautiously optimistic outlook for the commercial property market in the second half of 2025. Consumer inflation remained steady at 2.8% in May, below the Bank’s 3%-6% target — creating room for a further 25bps rate cut, which FNB expects later in the year.
There are also encouraging signs in several forward-looking indicators. The Bank’s business cycle leading indicator rose 4.1% year on year in March, while new passenger vehicle sales surged 30.3% in May. Residential mortgage demand also posted strong growth, rising by 16.2% by the end of 2024, though early 2025 data is still pending.
These positive signals have led FNB to revise its GDP growth forecast for 2025 to 1.1%, more than double the 0.5% of 2024. FNB believed this would provide a supportive environment for a modest recovery in commercial property sales activity during the second half of the year.
Adding to the cautiously positive sentiment is a continued fall in vacancy rates across all commercial property classes.
Even though the second quarter of 2025 marked a clear fall in both confidence and market activity, FNB remains hopeful that improving macroeconomic conditions and further monetary easing will support a gradual rebound. It expects overall commercial property sales activity in 2025 to outperform that of 2024 — assuming no further deterioration in the economic or political landscape.
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