Should interest rates continue to drop, key metros across the country stabilise and reforms persist, it is projected that the South African commercial real estate market (CRE) could surge even higher than the current trillions rand market.
According to Gmaven’s data, SA’s CRE market continues to be the largest industry in Africa, having survived the pandemic, lack of economic growth in the country and inflation-related issues.
“What better indication of the resilience of the SA commercial real estate sector - especially industrial and retail categories - than the official data from the Property Sector Charter Council? - Raul Flores
The CRE market already reached more than R1 trillion at the end of June in 2023, an increase of almost double against 2015 figures. It may in fact even be higher as available financials were compiled from SA municipal data which is known to be understated. Municipal information excludes state and municipal-owned commercial properties, hospitals, hotels, schools and multi-dwelling residential properties. Municipal commercial property is often valued below market value to keep rates and taxes the municipality itself has to pay, in check. On the other hand, property in private possession is over-valued in order to force owners to pay higher rates and taxes to the municipality.
With the latest exchange rate (as of 14 Feb 2025) of more than R18 to the dollar (which has strengthened over the last week), SA’s per capita CRE value is much lower than that of the United Kingdom with a similar population size. In SA, listed property owners hold approximately R400 billion of the total R1.92 trillion CRE value, with the highest market value in the hands of owner-occupiers, private owners and pension/life funds. Gauteng and the Western Cape continue to dominate the CRE market as predicted by Titan Property Group in 2024, with less urbanised provinces such as Limpopo and Mpumalanga beginning to also show retail growth.
The importance of the commercial real estate lies in the role it plays across a variety of areas such as rental projections, energy consumption and major economic decisions such as infrastructure spend. This is essential for investors, policymakers and business to make informed decisions about any future financial transaction.
Municipalities are known for inflating the value of privately-owned CRE properties to extract more from owners, pressuring valuers to set higher valuations. This is only a benefit to owners on paper and should be offset against service delivery which could stifle investment. Strong local government services attract residents and businesses, which in turn, boost property values.
Commercial property values can fluctuate due to economic conditions and property-specific factors. The Government of National Unity (GNU’s) promises of improving service delivery, infrastructure, security, property rights and investor confidence are key drivers for value growth. However, investors should keep an eye on provinces such as the DA-run Western Cape where promises such as the above, are put into practise.
South Africa’s commercial real estate market has shown real strength, especially in the industrial and retail sectors, despite ongoing challenges. With interest rates expected to drop and reforms gaining momentum, I’m confident we’ll see even more growth in the sector. If service delivery and infrastructure continue to improve, there’s no reason why South Africa can’t solidify its position as a major player in the global commercial property market.