Commercial Real Estate Market in South Africa - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

Commercial Real Estate Market in South Africa is segmented by Type (Office, Retail, Industrial, Logistics, Hospitality, and Multi-Family) and by Key cities, urban-suburban and rural markets.

Market Snapshot

South Africa’s Commercial Real Estate Market Overview
Study Period: 2016 - 2026
Base Year: 2020
CAGR: 12.45 %
South Africa’s Commercial Real Estate Market Top Companies

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Market Overview

South Africa is Africa’s second-biggest economy, with an estimated population of 57.7 million and an estimated GDP per capita of USD 6,377 in 2018. As South Africa’s economy has exited recession, there is optimistic sentiment in the real estate market. South Africa still offers a sustainable commercial property sector regardless of the country's current economic malaise. There is currently a high level of political and economic uncertainty while investors and business leaders preferring to hold back long-term investments and commitments.

The economy may be weak currently, but the long-term outlook remains positive and growing. The commercial real estate finance sector continues to show steady improvement driven by retail, industrial and office developments. However, South Africa’s commercial real estate distribution growth expectations have been scaled back due to restrained domestic conditions, rising vacancies and an oversupply of space, especially in specific connections in the office and retail sector. While Cape Town has enjoyed a degree of buoyancy areas, Johannesburg, Durban, and Pretoria are in dire need of renewed investment activity as they encounter high vacancies and protracted rental pressure.

In Johannesburg, the office space vacancy rate in 2019 stands at 12.2%. Sandton is experiencing its highest-ever vacancy rate at 17.6% in 2019. The commercial property market in Cape Town has been in a recovery phase for time being, and demand for office space is expected to be stable with no major setbacks. There is a need for investment activity in the office and another commercial related sector which would ultimately drive the demand.

It is expected that listed property REITs to produce double-digit returns to an investor in 2019 due to its offshore exposure. Gauteng dominated investment activity in 2018, while investment growth is dominated by the office sector. Overall, retail leads the way with followed by industrial and office sectors.

Scope of the Report

The report provides key insights into the commercial real estate market in South Africa. It includes technological developments, trends, initiatives taken by the government in this sector. The report sheds a light on the key trends in the market like factors driving the market what are the restraints to the market growth and opportunities going forward. Additionally, the competitive landscape of the residential real estate market of Vietnam is depicted through the profiles of key players active.

BY Type
Offices
Retail
Industrial
Logistics
Multi-family
Hospitality
By Key Cities
Johannesburg
Cape Town
Durban
Port Elizabeth
Bloemfontein
Pretoria

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Key Market Trends

Office Vacancy Rates are Getting Absorbed Quickly

The City of Cape Town, among the major metropolitan municipalities, has the lowest vacancy rate at 7.7% in Q1 2019. The highest vacancy rate was recorded at 13.5% for the eThekwini municipality among the larger metros. The vacancy rate of Durban CBD with 19.7% is highest in the region. Hillcrest/Gillits saw the most improvement in the vacancy rate.

The city of Johannesburg has a vacancy rate of 12.2% in the first quarter of 2019. The vacancy rates in Sandton, Sunninghill, Midrand, and Parktown were all at a multi-year high.

The city of Tshwane recorded an aggregate office rate of 9.0% down by 1.2% from a year ago. The vacancy rate of developing Highveld Technopark increased to 13%, however, speculative activity has improvement reduced which could stabilize occupancy levels in the coming time. As spaces get smaller and retrenchments increase, office vacancies will be on the rise. However,the positive aspect is that these vacancies can be absorbed by converting them into serviced offices or co-working spaces.

South Africa’s Commercial Real Estate Market Share

Occupancy Rates of Hotels in South Africa Shows Marginal Growth

There is a 5.6% compound annual increase in room revenue in South Africa’s slow-growing market. Due to water shortages in Cape town, offset by an increase in tourism led to a drop in the guest night in 2018.

The number of available rooms rose by 1.3% in 2017, the largest increase since 2011. Openings in 2017 included the Radisson Blu Hotel & Residences and Radisson Red V&A Waterfront in Cape Town and the Sun International Meropa in Polokwane, which are four-star hotels; and the Stayeasy Cape Town City Bowl, a three-star hotel.

Guest nights to grow a bit faster than room supply due to faster growth in foreign and domestic tourism,  the occupancy rate for hotels is expected to edge up in 2019 through 2022.

South Africa’s Commercial Real Estate Market Growth

Competitive Landscape

South Africa’s commercial real estate market is fragmented as there are many local players who compete in the market, along with global players. Developers are more inclined to spend money on reinventing property, rather than building on new land. It is also noted that South African’s are migrating to invest in properties outside Africa mostly in Europe due to its robust economy and growth. Investment activity in the industrial sector was led by Gauteng in 2018. Johannesburg and Cape Town are experiencing a notable rise in demand for mixed-use buildings comprising office, health, and lifestyle facilities. South Africa’s REIT sector is outperforming in terms of returns to the investor. There is a need for investment in all the sectors to foster further development in commercial real estate in South Africa.        

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Assumptions

    2. 1.2 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS

    1. 4.1 Current Economic Scenario and Consumer Sentiment

    2. 4.2 Commercial Real Estate Buying Trends - Socioeconomic and Demogpaphic Insights

    3. 4.3 Government Initatives, Regulatory Aspects for the Commercial Real Estate Sector

    4. 4.4 Insights on Existing and Upcoming Projects

    5. 4.5 Insights on Interest Rate Regime for General Economy, and Real Estate Lending

    6. 4.6 Insights on Rental Yields in Commercial Real Estate Segment

    7. 4.7 Insights on Capital Market Penetration and REIT Presence in Commercial Real Estate

    8. 4.8 Insights on Public-private Partnerships in Commercial Real Estate

    9. 4.9 Insights on Real Estate Tech and Startups Active in Real Estate Segment (Broking, Social Media, Facility Management, and Property Management)

  5. 5. MARKET DYNAMICS

    1. 5.1 Drivers

    2. 5.2 Restraints

    3. 5.3 Opportunities

    4. 5.4 Challenges

  6. 6. MARKET SEGMENTATION

    1. 6.1 BY Type

      1. 6.1.1 Offices

      2. 6.1.2 Retail

      3. 6.1.3 Industrial

      4. 6.1.4 Logistics

      5. 6.1.5 Multi-family

      6. 6.1.6 Hospitality

    2. 6.2 By Key Cities

      1. 6.2.1 Johannesburg

      2. 6.2.2 Cape Town

      3. 6.2.3 Durban

      4. 6.2.4 Port Elizabeth

      5. 6.2.5 Bloemfontein

      6. 6.2.6 Pretoria

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Market Concentration

    2. 7.2 Company Profiles

      1. 7.2.1 Developers

        1. 7.2.1.1 Growthpoint Properties

        2. 7.2.1.2 Amdec Group

        3. 7.2.1.3 PAM Golding Properties

        4. 7.2.1.4 Excellerate JHI

        5. 7.2.1.5 Chas Everitt Property Group

        6. 7.2.1.6 API Property Group

      2. 7.2.2 Real Estate Agencies and Trusts

        1. 7.2.2.1 CRE Africa

        2. 7.2.2.2 Savills South Africa

        3. 7.2.2.3 Broll Property Group

        4. 7.2.2.4 City Property

        5. 7.2.2.5 Fine & Country

      3. 7.2.3 Other Companies (Startups and Associations)

        1. 7.2.3.1 Fine & Country

        2. 7.2.3.2 Redefine Properties

        3. 7.2.3.3 Arrowhead Properties

        4. 7.2.3.4 Instant Property

        5. 7.2.3.5 Imfuna

        6. 7.2.3.6 SAproperty.com

        7. 7.2.3.7 South African PropTech Association

        8. 7.2.3.8 South African Property Owners Association

  8. 8. FUTURE OF THE MARKET AND ANALYST RECOMMENDATIONS

  9. 9. INVESTMENT ANALYSIS

    1. 9.1 Direct Investments

    2. 9.2 Indirect Investments

  10. 10. DISCLAIMER

  11. 11. ABOUT US

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Frequently Asked Questions

The Commercial Real Estate Market market is studied from 2016 - 2026.

The Commercial Real Estate Market is growing at a CAGR of 12.45% over the next 5 years.

Growthpoint Properties, Amdec Group, Pam Golding Properties, Excellerate JHI, Chas Everitt Property Group are the major companies operating in Commercial Real Estate Market.

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