What predicts commercial market recovery… GDP?
Tenant rental performance is strongly influenced by economic growth, as measured by GDP (Gross Domestic Product). But for the first time in a decade, the percentage of commercial property tenants in good standing has performed below GDP.
The ‘hard lockdown’ drop of -17.8% year-on-year in GDP is very much reflected in the corresponding sharp drop in the percentage of tenants in good standing during that quarter.
The fact that the tenant population’s payment performance has only partially recovered in the 3rd and 4th quarter is arguably reflected in the fact that GDP too has only partly improved.
Having witnessed 2 quarters of considerable, but not “full” recovery in the percentage of tenants in good standing, which coincides with 2 quarters of significant, although still negative GDP growth recovery by the final quarter of 2020, real GDP growth remained negative at -4.1% year-on-year.
With indicators pointing towards the pace of economic recovery slowing down after rebounding off a very low base, this could make the last stages to “full” recovery of pre-lockdown levels an arduous journey.
Vacancy Survey 2023 Q3
The demand for residential rental property remains strong. Vacancies have declined nationally to 6.76% in the third quarter of 2023, the lowest since 2017. Despite a constrained economy, tenants have continued to meet their rental obligations with te…