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Fuel price to hit malls hard

Home Business Management Finance & Investment Fuel price to hit malls hard

By John Loos: Property Sector Strategist, FNB Commercial Property Finance

THE fuel price increase has added significantly to overall consumer price inflation, and a further increase will sustain the pressure. For many consumers this will mean cutting back on discretionary spend.

Super-regional and regional shopping centres heavily focused on entertainment, eating out, clothing and footwear will feel the pressure, while smaller convenience and neighbourhood centres will be less affected.

The ongoing fuel price increases will also further negatively affect an already struggling office property market, which is battling low occupancy rates due to more people working from home post the Covid-19 lockdowns.

Now, as fuel prices become exorbitant, we expect more commuters to work from home as they try to contain their fuel bills. This could serve as additional encouragement for employers to reduce their office space needs.

Overall inflation has driven higher interest rates, and this will impact the commercial property sector by containing credit-driven property buying.

We anticipate that sales activity in the commercial property market will start to slow in the second half of 2022, after a recent period of strengthening — the ongoing interest rate hikes being a key driver of this expected slowdown.

The 4th commercial property sub-sector that is affected by high costs of fuel of late must surely be hotel property. Already challenged by revenues and occupancy rates still well-down on pre-lockdown days, high petrol prices are a negative for holiday and business travel, as well as demand for overnight accommodation.

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