Commercial Real Estate Market in South Africa - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Commercial Real Estate Market in South Africa is segmented by Type (Office, Retail, Industrial, Logistics, Hospitality, and Multi-family) and Key cities (Johannesburg, Cape Town, Durban, Port Elizabeth, Bloemfontein, Pretoria, and Others).

Market Snapshot

commercial real estate market in south africa
Study Period: 2018-2027
Base Year: 2021
CAGR: >5 %
 commercial real estate south africa

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Market Overview

The commercial real estate market in South Africa is estimated to register a CAGR of more than 5% during the forecast period.

The economy will likely be significantly improved from the hard lockdown of 2020. Market experts expect that actual average capital values on commercial property will at least halt their decline or recent years in 2022, moving back into very low single-digit positive territory. However, rising cap rates and weak net operating income growth are expected to keep average capital values in real declining territory. In other words, the low capital growth that may be experienced is not expected to keep pace with the general price inflation rate in the economy.

The multi-year correction in property values is, thus, in effect, expected to continue in 2022, albeit at a slower pace and in real terms only. Retail property performance improved in 2021, but 2022 will likely make further improvement tough going. After underperforming the office market during the lockdown in 2020, retail property made something of a comeback in 2021, and its total returns last year likely outperformed those of office property but underperformed those of industrial property.

The impact of COVID-19, coupled with economic pressures, continues to create challenges for most corporate real estate sectors in South Africa. For sustainable economic recovery to occur in 2021, the government committed to implementing socio-economic reform to effectively re-stabilize the economy.

Scope of the Report

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

Commercial Real Estate Market in South Africa is segmented by Type (Office, Retail, Industrial, Logistics, Hospitality, and Multi-Family) and Key cities (Johannesburg, Cape Town, Durban, Port Elizabeth, Bloemfontein, Pretoria, and Others). The report also goes into length about the short-term and long-term impact of COVID-19 on the commercial real estate of South Africa.

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

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Key Market Trends

Office Vacancy Rates are Yet to be Absorbed

South Africa has seen its historically robust office fundamentals erode significantly over the last year. Vacancy rates have steadily risen as corporate consolidations and the rise in work-from-home result in more space being given up in the market.

At the end of the second quarter of 2021, Johannesburg had the highest office vacancy rate across all major metropolitans. Office demand dynamics have shifted considerably as many corporates continue to scale down on space requirements in line with new work from home and the office rotational hybrid model.

Office demand dynamics have continued to soften as corporates look to scale down on space requirements in line with new work from home and office rotational hybrid models. The net effect is that office foot count has declined significantly from pre-Covid levels.

While office fundamentals are expected to continue softening over the foreseeable future, qualifying tenants may find great opportunities to secure favorable long-term lease arrangements.

commercial property market

Industrial Market Showing Growth

South Africa's industrial sector has seen little change in activity from the first quarter of 2021; landlords have started firming up their rentals. The resilience in industrial fundamentals (particularly amongst specialized quality assets) has been driven partly by the local market beginning to run into stock issues as various tenants pursue up-scaling operations.

Industrial distribution and multi-parks have outperformed all segments, driven by a rebound in retail trade volumes and a surge in e-commerce activity. Many traditional retailers have introduced online sales platforms in response to trade restrictions and reduced foot traffic, further driving the demand for storage and distribution space. Interestingly, big-box industrial space exceeding 25,000m2 experienced a significant spike in vacancy rates, likely caused by larger operators scaling down seeking consolidation and efficiency benefits. Subsequently, 10,000m2- 25,000m2 box sizes have shown a firming up in occupancy levels over the same period.

 retail property market in south africa

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 Africans are migrating to invest in properties outside Africa, mostly in Europe, due to its robust economy and growth. 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.

Recent Developments

  • February 2022: Growthpoint Properties was planning to convert its Riverwoods Office Park in Bedfordview, Johannesburg, into residential units as SA’s biggest landlord seeks to offset the glut in office space by capitalizing on the growing need for homes. The ZAR 200 million project sees Growthpoint teaming up with black-owned Setso Property Fund and BlackBrick Club to convert the 35,000m² sites at St Andrews, a predominantly residential area, into more than 250 apartments at the cost of ZAR 200 million.
  • May 2021: Absa Bank partnered with Amdec Group, South Africa’s leading developer of new urban precincts, to develop the first tower of the multi-billion rand Harbour Arch project on the Foreshore in Cape Town. With an estimated R15 billion private equity investment, the Harbour Arch development is set to have an extremely positive impact on the City of Cape Town – and its inhabitants – both now and in the future.

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 Demographic Insights

    3. 4.3 Government Initiatives and 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)

    10. 4.10 Impact of COVID-19 on the Market

  5. 5. MARKET DYNAMICS

    1. 5.1 Drivers

    2. 5.2 Restraints

    3. 5.3 Opportunities

  6. 6. MARKET SEGMENTATION

    1. 6.1 By Type

      1. 6.1.1 Offices

      2. 6.1.2 Retail

      3. 6.1.3 Industrial and Logistics

      4. 6.1.4 Multi-family

      5. 6.1.5 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. 6.2.7 Others

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Market Concentration

    2. 7.2 Company Profiles

      1. 7.2.1 Growthpoint Properties

      2. 7.2.2 Amdec Group

      3. 7.2.3 PAM Golding Properties

      4. 7.2.4 Excellerate JHI

      5. 7.2.5 Chas Everitt Property Group

      6. 7.2.6 API Property Group

      7. 7.2.7 De Lucia Group

      8. 7.2.8 Legaro Property Development

      9. 7.2.9 Devmark Property Group (Pty) Ltd

      10. 7.2.10 Rabie Property Group (Pty) Ltd*

    3. *List Not Exhaustive
    4. 7.3 Other Companies

  8. 8. FUTURE OF THE MARKET AND ANALYST RECOMMENDATIONS

  9. 9. DISCLAIMER

  10. 10. ABOUT US

**Subject to Availability

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Frequently Asked Questions

The South Africa Commercial Real Estate Market market is studied from 2018 - 2027.

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

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

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