The commercial and industrial property market in South Africa continues to evolve, and with it, tenant expectations are becoming more refined. While fundamentals like location and price still matter, they are no longer enough on their own. Tenants in 2026 are making more deliberate decisions, focusing on properties that actively support their day to day operations.

For landlords, this shift presents a clear opportunity. By understanding what tenants truly value, properties can be positioned more effectively, vacancies can be reduced, and long term tenant relationships can be strengthened.

One of the most important factors for tenants today is accessibility and logistics. Businesses want locations that allow them to operate efficiently, with easy access to major transport routes and minimal friction in moving goods or staff. In industrial sectors, this often means properties with good truck access, practical yard space, and layouts that support smooth loading and offloading. A well located property with functional access will consistently outperform alternatives that are less convenient, even if those alternatives are more affordable.

Closely linked to this is the importance of internal layout. Many tenants are prioritising usable, efficient space over sheer size. Open floor areas, good height for storage or operations, and logical flow within the unit all contribute to better functionality. In some cases, relatively small adjustments such as improving access points, reconfiguring internal divisions, or enhancing circulation space can significantly increase a property’s appeal.

Flexibility has also become a key consideration. Businesses are operating in a more dynamic environment and often prefer lease structures that allow for growth or adjustment over time. While long term leases remain common, there is increasing value in offering options that allow tenants to scale their space or adapt as their needs change. Landlords who can accommodate this approach are often better positioned to attract a wider range of tenants.

Another area of focus is the overall condition and presentation of a property. Clean, well maintained spaces create a strong first impression and signal professionalism and reliability. Simple improvements such as fresh paint, upgraded lighting, and general maintenance can go a long way in making a property more attractive. These enhancements not only support leasing activity but can also contribute to stronger tenant retention over time.

Security remains an important consideration as well. Tenants are looking for environments where their operations, staff, and assets are protected. Properties within secure parks or well managed areas tend to perform well, particularly when supported by visible security measures and good management practices.

Importantly, tenants are increasingly comparing multiple options before making decisions. This means that small differences between properties can have a meaningful impact. Landlords who take the time to understand their target tenant and align their property offering accordingly are more likely to stand out in a competitive market.

The encouraging reality is that many of the factors tenants value do not require major redevelopment. In many cases, practical, targeted improvements can significantly enhance a property’s competitiveness. Focusing on usability, access, presentation, and flexibility can reposition a property and make it more aligned with current market demand.

As the market continues to mature, success in commercial and industrial property is becoming more closely linked to how well a space supports the businesses that occupy it. Landlords who adopt a tenant focused approach are likely to see stronger performance, more consistent occupancy, and better long term outcomes.

In 2026, understanding tenant needs is not just an advantage. It is a practical strategy for achieving better results in an increasingly competitive property landscape.

Interest Rates in 2026: What Today’s Property Market Is Telling Us

Interest rates have been elevated for several years, and by 2026 the South African property market has largely adjusted to this reality. While much of the uncertainty of rapid rate hikes has passed, the effects of sustained higher interest rates are now clearly visible across commercial, industrial, and investment property.

For property investors and business owners, the question is no longer when rates will drop sharply, but rather how to operate, invest, and grow in a market where borrowing costs remain meaningful.

A Market That Has Recalibrated

Unlike previous cycles where higher interest rates were short-lived, the current environment has lasted long enough for behaviour to change.

Buyers, sellers, banks, and tenants have all adjusted their expectations:

• Financing is assessed more conservatively
• Buyers focus on affordability and cash flow
• Sellers are under pressure to price realistically

This recalibration has created a more balanced, disciplined property market — particularly in the commercial and industrial sectors.

What Sustained Higher Interest Rates Mean for Property

Interest rates influence property decisions in several practical ways:

1. Borrowing Capacity and Demand

Higher interest rates reduce how much buyers can borrow, which directly affects demand at certain price points. Properties that are correctly priced and well-located continue to transact, while overpriced assets take longer to sell.

In 2026, demand has not disappeared — it has simply become more selective.

2. Valuations Are Driven by Income, Not Optimism

With borrowing costs remaining elevated, investors are placing greater emphasis on net rental income and yield.

This shift has led to:

• More conservative valuations
• Greater scrutiny of expenses and vacancies
• Stronger demand for properties with stable tenants

Industrial property has benefited from this trend due to its essential role in logistics, manufacturing, and regional distribution.

3. Tenant Priorities Have Changed

Businesses operating under higher financing and operating costs are focused on efficiency. In 2026, tenants value:

• Practical layouts
• Energy reliability
• Predictable operating expenses

Properties that support business continuity and cost control are outperforming those that rely purely on location or aesthetics.

Interest Rate Certainty Matters More Than Direction

While small interest rate adjustments may occur, the key theme for 2026 is certainty rather than speculation.

Property buyers and owners are planning for:

• Rates that remain higher than historic lows
• Tighter lending criteria
• Less tolerance for financial strain

As a result, debt structures are being approached more strategically, with many investors prioritising repayment stability over short-term gains.

Lease Structures Are Under Pressure

Sustained higher interest rates have placed lease structures under the spotlight. Inadequate escalations, unclear cost recoveries, or short lease terms can quickly undermine returns.

Well-performing properties in 2026 typically offer:

• Escalations aligned with inflation
• Transparent operating cost recovery
• Longer-term lease commitments

Industrial and logistics properties continue to perform well due to their operational necessity and typically stronger lease fundamentals.

Where Opportunities Are Emerging

While higher interest rates have slowed speculative activity, they have also created opportunity.

Properties that were acquired at aggressive pricing or with high leverage are being reassessed. This has opened the door for buyers who:

• Focus on cash flow rather than capital growth
• Take a long-term view
• Prioritise asset quality and location

In many cases, this has strengthened the market by reallocating assets to owners with more sustainable financial structures.

What This Means for Property Strategy in 2026

The current interest rate environment has reinforced an important principle: property must work on its own merits.

Successful investors and businesses in 2026 are those who focus on:

• Sustainable rental income
• Conservative leverage
• Assets that support tenant operations

Rather than waiting for a return to unusually low rates, the market is now operating within realistic financial parameters.

At Oriprops, we see this shift as a positive one. A property market built on strong fundamentals, realistic pricing, and long-term planning is better positioned to deliver stable performance — even in a higher interest rate environment.

Global Interest Rates and Their Ripple Effect on Commercial Real Estate

In recent years, global commercial real estate (CRE) has entered a new era—one defined not by aggressive expansion or record-breaking yields, but by financial caution. As central banks across the world hold interest rates at elevated levels to curb inflation, property markets are feeling the full weight of tighter credit and higher borrowing costs.

This global trend is reshaping how investors, developers, and occupiers approach the market—and South Africa is no exception.

The End of “Easy Money”

From 2010 through 2020, commercial real estate flourished under historically low interest rates. Capital was abundant, yields were attractive, and investors could finance developments with relative ease. However, post-pandemic inflation forced central banks in the US, UK, and Europe to raise rates aggressively, triggering a chain reaction across global markets.

The result has been what many call the “great revaluation” of property assets. Cap rates have expanded, financing has become more selective, and previously lucrative developments are now under scrutiny for profitability. Investors are seeking income stability over speculative growth, while developers are pressing pause on new projects until lending conditions improve.

Commercial Real Estate Under Pressure

Globally, the immediate impact of high interest rates has been felt in three key ways:

1. Reduced Transaction Volumes:
   Investors are sitting on the sidelines, waiting for clarity on when rates might ease. Global CRE deal volumes dropped nearly 50% year-on-year between 2023 and 2024, according to MSCI data.
2. Decreased Valuations:
   As debt becomes more expensive, property values naturally decline. Buyers are factoring higher cap rates into pricing, while sellers remain anchored to past valuations, creating a market stalemate.
3. Rising Default Risk:
   Many property owners with floating-rate debt or upcoming refinancing obligations are finding themselves squeezed between higher interest payments and lower rental growth.

South Africa: Reflecting Global Trends

While South Africa’s economic environment has its own complexities—currency volatility, load-shedding impacts, and moderate GDP growth—its property market moves in tandem with global sentiment.

The South African Reserve Bank’s decision to keep the repo rate at 8.25% in 2025 mirrors the cautious stance of global central banks. This has significant knock-on effects for the local commercial property sector:

• Developers: Face higher project financing costs, often exceeding 13–15% in effective rates, making speculative construction less viable.
• Investors: Focus on income-generating assets with reliable tenants and long lease profiles rather than chasing capital appreciation.
• Landlords: Feel pressure to maintain occupancy and negotiate renewals as tenants push back on rental escalations amid cost inflation.

The once-booming office sector continues to see oversupply, while industrial and logistics properties remain the bright spots—supported by e-commerce growth and infrastructure expansion. In essence, the South African market is following the same bifurcation seen globally: core, resilient assets outperform; speculative or inefficient ones lag.

Opportunities in a Tight Market

Despite the challenges, this new high-rate environment is not without opportunity.

1. Cash Buyers and Institutional Investors
   Those with strong balance sheets or low gearing are taking advantage of discounted assets and distressed sales. The next 12–18 months could present some of the best acquisition opportunities in years.
2. Industrial and Alternative Sectors
   Demand remains robust for warehousing, cold storage, and data centers—sectors driven more by logistics and digital trends than by macroeconomic cycles.
3. Sustainability and Energy Efficiency
   Buildings with solar, backup power, and green certifications are commanding a “rental premium.” In a capital-tight world, efficiency equals resilience.

Looking Ahead

The consensus among economists is that global interest rates will remain “higher for longer.” Inflation is easing but not fast enough to trigger major rate cuts in 2025. As a result, investors should expect a more disciplined, yield–focused property market where fundamentals—tenant quality, lease length, location, and operational efficiency—outweigh speculation.

For South Africa, this means a flight to quality: premium industrial parks, efficient offices, and strategically located retail centers will continue to attract capital. Older, underperforming assets will likely need to be repositioned or repurposed to remain competitive.

Final Thoughts

The commercial real estate landscape has shifted from a growth story to one of resilience and adaptability. High global interest rates have redefined how value is measured, forcing investors to return to the basics: strong cash flow, prudent leverage, and strategic asset management.

While this cycle may feel restrictive, it’s also resetting the market for long-term stability. For those who can navigate the tighter lending environment and focus on fundamentals, the next wave of opportunity in commercial real estate is already taking shape.

which includes our industrial and office market rental achieved/sqm

Craig McFadyen

Principal.

Mpumalanga: South Africa’s Emerging Logistics Corridor

In 2025, all eyes are on Mpumalanga—and for good reason. With industrial nodes in Nelspruit, Middelburg, and Witbank strategically positioned on major trade routes, the province is rapidly emerging as South Africa’s next great logistics corridor.

While Gauteng remains the dominant logistics hub, cost pressures, congestion, and decentralisation are encouraging a wider geographic focus—and Mpumalanga is rising to meet that demand.

Strategic Location at the Heart of Regional Trade

Mpumalanga lies at a crucial intersection between Gauteng, Mozambique, and Eswatini, making it ideal for companies with cross-border supply chains. The N4 Corridor—part of the Maputo Development Corridor—connects Johannesburg to the Port of Maputo, enabling efficient access to global trade routes.

Cities like Nelspruit and Middelburg offer low land costs, skilled labour, and a growing ecosystem of logistics and manufacturing businesses. Companies involved in agriculture, mining, FMCG, and wholesale distribution are increasingly choosing the province for its accessibility and efficiency.

Growth of Distribution Hubs and Industrial Parks

Over the past 12 months, the region has seen a sharp uptick in industrial park developments. Rocky Drift, Riverside Park, and Middelburg Industrial Zone have all reported increased demand from tenants requiring modern logistics infrastructure.

New developments are catering to a range of users—from cold chain facilities serving agri-exporters to bulk storage warehouses for mining equipment and fuel. Investors are attracted by above-average yields (often exceeding 9%) and growing tenant demand.

Reduced Pressure in Gauteng Driving Spillover

With land and rental costs rising in Johannesburg and the East Rand, Mpumalanga is becoming a cost-effective alternative for logistics operators. Many are moving their bulk storage and distribution functions into the province while retaining satellite offices in Gauteng.

Large-format users—those needing 10,000m²+—are especially drawn to areas like Middelburg, where vacant industrial land is still affordable, and municipal engagement is improving.

Cross-Border Logistics on the Rise

Mpumalanga’s role in regional logistics is also benefiting from increased trade with Mozambique and Eswatini. Border posts such as Lebombo and Oshoek are handling more traffic than ever, and logistics firms are seeking secure, compliant warehousing within 30–50km of these crossings.

This demand is driving investment in customs clearance facilities, bonded warehouses, and multi-tenant logistics parks near Nelspruit and Komatipoort.

Conclusion

Mpumalanga is no longer just a feeder province for Gauteng—it’s becoming a logistics engine in its own right. With infrastructure, affordability, and location on its side, the region is attracting national and regional logistics players looking for long-term scalability.

As Q2 2025 unfolds, investors, brokers, and developers with interests in industrial real estate should keep a sharp eye on this fast-moving, underappreciated corridor.

which includes our industrial and office market rental achieved/sqm

Craig McFadyen

Principal.

When it comes to selling property in South Africa, there are key legal and practical considerations that both sellers and property brokers should be aware of. In this blog post, we’ll discuss why signing an open mandate with a property broker is beneficial for South African sellers and why a mandatory disclosure form is legally required.

What is an Open Mandate?

An open mandate is an agreement between a seller and a property broker that allows the broker to market and sell the property on behalf of the seller. Unlike an exclusive mandate, which restricts the seller from using other brokers, an open mandate allows the seller to work with multiple brokers simultaneously.

Benefits of an Open Mandate

1. Wider Exposure: By signing an open mandate, sellers can access a larger pool of potential buyers, as multiple brokers can market the property to their respective networks.
2. Faster Sale: With more brokers working to sell the property, the chances of finding a buyer quickly are higher. This is especially beneficial if the seller is looking to sell the property within a specific timeframe.
3. Competitive Pricing: Brokers competing to sell the property may encourage sellers to price their property competitively, which can attract more buyers.
4. Flexibility: Sellers have the flexibility to work with multiple brokers and can terminate the open mandate at any time without incurring penalties.

Mandatory Disclosure Form

In South Africa, the Consumer Protection Act (CPA) requires sellers to provide potential buyers with a mandatory disclosure form. This form is designed to protect buyers by ensuring they have all the necessary information about the property before making an offer.

What Information is Required?

The mandatory disclosure form should include:

• Defects: Any known defects or issues with the property, such as structural problems, leaks, or electrical issues, must be disclosed.
• Alterations: Details of any alterations or renovations made to the property, including whether the necessary building permits were obtained.
• Zoning: The zoning of the property, including any restrictions on land use or future development plans in the area.
• Services: Information about the availability and condition of essential services, such as water, electricity, and sewage.

Legal Implications of Non-Disclosure

Failure to provide accurate and complete information on the mandatory disclosure form can have legal consequences. Buyers have the right to cancel the sale if they discover undisclosed defects or issues after purchasing the property. Sellers may also be liable for damages if they knowingly conceal information or provide false information on the disclosure form.

Conclusion

In conclusion, signing an open mandate with a property broker can provide sellers with a wider exposure and faster sale of their property. However, it is essential to comply with the legal requirements, such as providing a mandatory disclosure form, to avoid potential legal issues. By understanding and adhering to these requirements, sellers can ensure a smooth and successful property sale process in South Africa

South African banks play a pivotal role in the nation’s economic development by providing commercial financing to businesses across various sectors. Their risk appetite—the level of risk they are willing to accept—significantly influences lending practices and the broader economic landscape.​

Commercial Financing Landscape

In recent years, South African banks have demonstrated resilience amid challenging economic conditions. In the first half of 2024, major banks reported durable financial performances despite complex operating environments and elevated uncertainty. ​PwC South Africa

Risk Appetite and Lending Practices

The risk appetite of South African banks is shaped by factors such as economic conditions, regulatory requirements, and internal risk management frameworks. In 2023, lending activities declined as banks tightened their risk appetite in response to high interest rates and inflation. This cautious approach aimed to mitigate potential credit losses amid economic uncertainties. ​S&P Global

Despite these challenges, banks continued to support corporate and commercial clients, with loan growth observed in these segments. However, retail loan growth slowed as consumers faced increased financial pressure. ​Reuters

Commercial Real Estate (CRE) Sector

The CRE sector has been a focal point for assessing financial stability. The South African Reserve Bank highlighted that financial imbalances within the CRE sector have significantly increased since the COVID-19 pandemic, with variations across different segments. Banks have managed their exposure to this sector within defined risk appetite frameworks, regularly stress-testing portfolios against economic vulnerabilities. ​South African Reserve Bank+2South African Reserve Bank+2South African Reserve Bank+2Reuters+3South African Reserve Bank+3South African Reserve Bank+3Standard Bank Group: Home

Risk Management Strategies

To navigate the complex economic landscape, South African banks have adopted prudent risk management strategies. These include maintaining strong capital positions, diversifying loan portfolios, and implementing robust credit assessment processes. For instance, banks have managed mortgage loan exposures within clearly defined risk appetite frameworks, incorporating stress testing against potential economic downturns. ​Standard Bank Group: Home

Conclusion

South African banks continue to balance the imperative of supporting economic growth through commercial financing with the need to manage risk prudently. Their risk appetite is influenced by a confluence of economic indicators, regulatory landscapes, and internal policies. By maintaining robust risk management practices, these financial institutions aim to navigate uncertainties while contributing to the country’s economic resilience.

Connor McFadyen

Oriprops Property Broker – Mbombela.

The industrial property markets in Nelspruit, Witbank, Middelburg, and the East Rand are experiencing significant transformations as of early 2025. These changes are driven by factors such as e-commerce growth, infrastructural developments, and shifting economic dynamics. For stakeholders in Gauteng and Mpumalanga, understanding these trends is crucial for informed decision-making.​

1. E-Commerce Expansion Boosting Demand

The surge in online retail has markedly increased the need for modern warehousing and distribution centers. In the East Rand, areas like Germiston and Jet Park have become focal points due to their strategic proximity to OR Tambo International Airport and major highways. This connectivity facilitates efficient distribution channels, making these locations highly desirable for logistics operations. ​Ori Props

In Mpumalanga, cities such as Nelspruit, Witbank, and Middelburg are witnessing growing interest in industrial spaces. Their strategic positions along key transport routes enhance their appeal for warehousing and distribution activities. ​Ori Props

2. Low Vacancy Rates Indicating Strong Demand

The industrial property sector is characterized by notably low vacancy rates, reflecting robust demand. Nationally, vacancy rates averaged 3.6% in the third quarter of 2024, below the long-term average of 4.2%. Specifically, the East Rand maintained vacancy rates below 5%, underscoring its prominence as an industrial hub. ​Mendace Properties+1Mendace Properties+1

In Mpumalanga, industrial vacancy rates ranged between 6% and 8%, particularly in cities like Middelburg and Witbank. This indicates a steady demand for industrial spaces in the region. ​Ori Props

3. Rental Growth Trends

The strong demand for industrial properties has led to significant rental growth. In the East Rand, rentals increased by an average of 7.4% in the third quarter of 2024. This growth is driven by the area’s strategic location and the expanding logistics sector. ​Mendace PropertiesPaula Hardy

In Mpumalanga, while specific rental growth figures are less pronounced, the consistent demand for industrial spaces suggests a stable rental market. Cities like Nelspruit, Witbank, and Middelburg continue to attract industrial tenants, contributing to a balanced supply-demand dynamic. ​

4. Development of Investable Industrial Nodes

The concept of ‘investable industrial nodes’ is gaining traction, particularly in Gauteng. These nodes are characterized by strategic locations near airports, major highways, and robust infrastructure. Developments such as the Rand Airport Commercial Park exemplify this trend, offering modern facilities tailored to logistics and distribution needs. ​improvon.co.za+1Paula Hardy+1

In Mpumalanga, cities like Nelspruit and Middelburg are emerging as key industrial nodes, benefiting from their strategic locations and ongoing infrastructural improvements. These developments enhance their attractiveness to investors and tenants alike. ​

5. Challenges: Construction Cost Inflation and Economic Factors

Despite positive trends, the industrial property sector faces challenges such as high construction cost inflation, which impacts developer profitability and places upward pressure on new-build rentals. Additionally, broader economic factors, including fluctuating business confidence and operational costs, influence market dynamics. ​Mendace Properties+1Mendace Properties+1

Conclusion

The industrial property markets in Nelspruit, Witbank, Middelburg, and the East Rand are poised for continued growth, driven by e-commerce expansion, low vacancy rates, and strategic infrastructural developments. Stakeholders in Gauteng and Mpumalanga should remain cognizant of these trends and challenges to effectively navigate the evolving landscape and capitalize on emerging opportunities.

which includes our industrial and office market rental achieved/sqm

Craig McFadyen

Principal.

In recent years, South Africa’s manufacturing and industrial sectors have faced significant challenges due to frequent electricity cuts and load shedding. These power disruptions have not only hampered production processes but have also led to increased operational costs, delayed projects, and a loss of global competitiveness. However, the recent suspension or reduction of load shedding and electricity cuts has brought a much-needed breath of fresh air to these sectors, with far-reaching positive effects on the economy.

1. Increased Productivity and Output

One of the most immediate benefits of suspending load shedding has been the restoration of consistent power supply, allowing manufacturers and industrial operators to run their processes without the fear of sudden outages. Consistent electricity availability means that production lines can operate at full capacity, leading to increased output. This improvement in productivity has not only boosted the confidence of local businesses but has also made South Africa a more attractive destination for foreign investment.

Previously, many companies had to invest in costly backup power solutions, such as diesel generators, to mitigate the effects of load shedding. The high costs of fuel and maintenance associated with these solutions significantly ate into profit margins. With a stable power supply, these expenses have been reduced, allowing companies to allocate resources more efficiently.

2. Cost Reduction and Improved Profit Margins

Load shedding forced many businesses to incur additional costs, from paying overtime for workers to complete delayed shifts to the maintenance and operation of backup generators. The unpredictability of power cuts often meant that raw materials were wasted, and equipment faced increased wear and tear due to sudden stoppages and restarts. These factors contributed to inflated operational costs, making it difficult for businesses to remain competitive both locally and internationally.

The suspension of load shedding has alleviated these financial burdens. Companies can now plan their operations with greater certainty, reducing the need for contingency plans that previously added to their expenses. Lower operational costs translate into improved profit margins, enabling businesses to reinvest in their growth and development.

3. Enhanced Global Competitiveness

The manufacturing and industrial sectors in South Africa have long been critical to the country’s economy, contributing significantly to GDP and providing employment to millions. However, frequent power disruptions eroded the confidence of international partners and clients. Export orders were often delayed, leading to reputational damage and the loss of market share to more stable economies.

With the suspension of load shedding, South African manufacturers are regaining their competitive edge on the global stage. The ability to fulfill orders on time and maintain consistent quality standards is restoring trust in South African products and services. This is particularly important in industries such as automotive manufacturing, mining equipment production, and food processing, where precision and reliability are paramount.

4. Job Preservation and Creation

The reduction or elimination of load shedding has also had a positive impact on employment in the manufacturing and industrial sectors. During periods of frequent power cuts, many companies were forced to downscale operations, resulting in job losses or reduced working hours for employees. The resumption of full-scale operations has not only preserved existing jobs but has also created opportunities for new employment as businesses expand.

Moreover, a stable power supply encourages investment in new technologies and processes, which often require skilled labor. This shift towards modernization and innovation can lead to the creation of high-quality jobs, further contributing to the country’s economic development.

5. Encouraging Sustainable Growth

While the suspension of load shedding has provided immediate relief, it also presents an opportunity for the manufacturing and industrial sectors to focus on sustainable growth. With consistent electricity, companies can invest in energy-efficient technologies, reducing their reliance on fossil fuels and minimizing their environmental impact. This move towards sustainability is not only beneficial for the planet but also positions South Africa as a leader in green manufacturing practices, attracting environmentally conscious investors and consumers.

Conclusion

The suspension or reduction of load shedding in South Africa marks a turning point for the manufacturing and industrial sectors. The benefits of consistent power supply are clear: increased productivity, reduced costs, enhanced global competitiveness, job preservation and creation, and the promotion of sustainable growth. As these sectors regain momentum, they are poised to play a crucial role in driving South Africa’s economic recovery and long-term prosperity. While challenges remain, the renewed energy in the industrial and manufacturing landscape offers a glimpse of a brighter, more stable future for the country.

Connor McFadyen

Oriprops Property Broker – Mbombela.

076 410 3304
Email: connor@oriprops.co.za

The Current State of the South African Commercial Property Market: A Provincial Analysis of Vacancy and Cap Rates in 2024

As the South African commercial property market navigates through economic uncertainty, regional performance continues to vary across key provinces. Gauteng, Mpumalanga, and the Western Cape are experiencing different levels of vacancy rates and cap rates in their office, retail, and industrial sectors. Among these, the Western Cape has consistently outperformed the rest of the country, showcasing stronger returns and resilience. This blog will explore how each of these provinces is faring in the current market, with a specific focus on why the Western Cape is leading the pack.

Gauteng: Market Recovery Faces Office and Retail Challenges

Gauteng, South Africa’s economic hub, is home to key cities like Johannesburg and Pretoria. However, the commercial property market here is struggling to regain pre-pandemic momentum, particularly in the office and retail sectors.

Office Market:
Office vacancy rates in key nodes such as Sandton and Rosebank remain elevated at around 15%–18%. The trend towards remote working and hybrid models has reduced demand for large office spaces, and landlords are under pressure to fill vacancies. Cap rates for office properties are sitting at around 9%–12%, which reflects the perceived risk in the sector.

Retail Market:
Retail spaces in Gauteng have been impacted by the rise of e-commerce and ongoing economic challenges, with vacancy rates between 9%–12%. Shopping centres in key locations have maintained a degree of stability, but secondary and tertiary retail spaces are struggling. Cap rates for retail properties range from 8%–10%.

Industrial Market:
The industrial sector remains the most promising in Gauteng, driven by the demand for logistics, warehousing, and distribution centres. Vacancy rates are low, hovering around 5%–7%, especially in areas like Germiston and Jet Park, which are well-positioned for logistics. Cap rates for industrial properties are in the 7%–9% range, showing strong investor interest in this sector.

Mpumalanga: Industrial Strength Amid Office and Retail Weakness

Mpumalanga, known for its industrial activity, particularly in cities like Middelburg and Witbank, has experienced mixed results across the commercial property sectors.

Office Market:
The office market in Mpumalanga is still catching up with more urbanised regions like Gauteng. Office vacancy rates in cities like Nelspruit and Witbank are higher, around 12%–15%. These spaces struggle with oversupply and weak demand from corporate tenants, resulting in cap rates of 10%–12%, reflecting the associated risk.

Retail Market:
Retail spaces in Mpumalanga face lower demand, particularly in secondary markets where foot traffic is lower. Vacancy rates for retail properties are between 10%–12%, and cap rates are hovering around 9%–11%. Malls in larger centres like Nelspruit perform better, but smaller retail centres face higher vacancy rates.

Industrial Market:
The industrial sector remains Mpumalanga’s strength, particularly around mining, logistics, and manufacturing hubs. Vacancy rates in the industrial sector are relatively low, at around 6%–8%, due to consistent demand for warehousing and industrial spaces. Cap rates are between 8%–10%, indicating solid demand for industrial properties, even though they lag slightly behind Gauteng’s industrial market in terms of yield.

Western Cape: The Standout Performer in 2024

The Western Cape, particularly Cape Town, is consistently outperforming other provinces in the commercial property market. Its combination of political stability, proactive governance, and a diversified economy has resulted in a more resilient property market across all sectors.

Office Market:
Cape Town’s office market has shown more resilience compared to Gauteng and Mpumalanga, with vacancy rates around 10%–12%. The demand for flexible workspaces, coupled with Cape Town’s growing reputation as a tech and financial hub, has contributed to stabilising the market. Cap rates for office properties are lower than in other provinces, sitting at around 7%–9%, which reflects investor confidence in the region.

Retail Market:
Retail properties in the Western Cape are performing better than in other regions, driven by a strong consumer market, tourism, and consistent foot traffic in key locations. Vacancy rates for retail spaces in the Western Cape are around 6%–8%, with popular areas like the V&A Waterfront seeing even lower vacancy rates. Cap rates for retail properties range from 6%–8%, showcasing solid investment returns and low perceived risk.

Industrial Market:
The industrial market in the Western Cape is where the province truly shines. With low vacancy rates of around 3%–5%, industrial properties in areas like Montague Gardens and Epping are in high demand. This is largely due to the province’s strategic positioning as a logistics hub, its well-managed infrastructure, and strong demand from e-commerce companies and manufacturers. Cap rates for industrial properties are some of the lowest in the country, ranging from 6%–7%, reflecting a stable, low-risk environment for investors.

Why is the Western Cape Outperforming Other Provinces?

Several factors have contributed to the Western Cape’s consistent outperformance in the commercial property market:

Political Stability and Good Governance:
The Western Cape has long been known for its efficient governance, especially in Cape Town, where the municipality provides reliable services and prioritises infrastructure development. This political stability is attractive to both local and international investors, who view it as a lower-risk region compared to other provinces.

Business-Friendly Environment:
Cape Town has become a hub for tech companies, startups, and creative industries. With a highly skilled workforce and attractive business conditions, more companies are choosing to relocate to the city, increasing demand for commercial spaces.

Tourism and Consumer Demand:
The Western Cape’s tourism industry remains one of the strongest in the country, and it continues to support the retail and hospitality sectors. High levels of foot traffic in prime retail areas ensure lower vacancy rates and consistent demand from tenants.

Logistics and Industrial Growth:
The province’s strategic location, with easy access to both national and international markets, has made it a key player in the logistics and industrial sectors. The growth of e-commerce has further fueled demand for warehousing and logistics spaces, contributing to lower vacancy rates and strong cap rates in the industrial market.

Sustainability Initiatives:
The Western Cape has embraced green building practices and sustainability initiatives, which are becoming increasingly important to both investors and tenants. Buildings with green certifications are seeing higher occupancy rates, as tenants are drawn to lower operating costs and environmental benefits.

Conclusion: The Western Cape Leads While Other Regions Catch Up

In conclusion, the South African commercial property market remains a mixed bag, with the Western Cape standing out as the leader in terms of both vacancy rates and cap rates across office, retail, and industrial sectors. While Gauteng and Mpumalanga are still grappling with challenges, particularly in the office and retail sectors, the industrial markets in these provinces continue to show promise.

Investors looking for stability and growth should consider the Western Cape, where strong governance, a business-friendly environment, and robust demand across all sectors are contributing to lower vacancy rates and attractive cap rates. Other regions may offer opportunities in the industrial sector, but the Western Cape remains the benchmark for commercial property investment in South Africa.

which includes our industrial and office market rental achieved/sqm

Craig McFadyen

Principal.

We have adjusted our reporting period to calendar quarters in order to remain aligned with other reporting bodies. The comments below are from our agents’ experience in the market during the reporting period. All rates quoted are actual figures achieved and not “asking” rates. If we have not had any change or have not had any transactions in the areas noted, we have left the figures unchanged.

The South African Commercial Property Market – Review of the previous 6 months and outlook for 2024

Introduction

The South African commercial property market has experienced significant shifts over the last six months, driven by evolving economic conditions, changing work dynamics, and emerging trends. As we look ahead to the rest of 2024, we expect several key factors to shape the office and industrial property sectors. The national elections in May 2024 have certainly created a level of uncertainty in the country which has split over into the commercial & industrial property market, particularly with larger businesses and developers choosing to shelve any projects until after the election, where the future economic road should be more clear.

Review of the Last 6 Months

The last six months have been marked by a gradual recovery in the South African commercial property market, following the disruptions caused by the COVID-19 pandemic, load shedding and the high interest rate environement. Both the office and industrial property sectors have shown resilience and adaptability, with several notable trends emerging.

1. Office Sector Adaptation

The office sector has been undergoing a transformation in response to changing work dynamics. The rise of remote and hybrid work models has led many companies to reassess their office space requirements. As a result, there has been a growing demand for flexible office solutions, such as coworking spaces, serviced offices, and hybrid workspaces. At the same time we are seeing larger companies pushing for staff to return to more “normal” office hours. Smaller businesses seem to running as usual with the demand for offices under 500 square metres increasing, specifically in the Bedfordview area and interestingly in the redevelopment nodes of Cape Town such as Gardens, Woodstock and Observatory. Century City remains a sought after office destination, provided the right rental rate can be secured.

While some of the larger companies are downsizing their office footprints, others are investing in redesigning their spaces to accommodate collaborative work and provide a better experience for employees. Health and safety considerations, such as improved ventilation, touchless technology, and energy efficient spaces, have become a priority for office occupiers.

2. Industrial Sector Resilience

The industrial property sector has demonstrated resilience over the last six months, driven by the growth of e-commerce, logistics, and distribution networks. The accelerated shift towards online shopping has increased demand for well-located industrial properties, particularly in urban areas.

Cape Town, East Rand and Witbank are examples where warehousing and distribution facilities near major transport hubs and industrial manufacturing nodes have been in high demand, as companies seek to optimize their supply chains and improve last-mile delivery capabilities. Investors have been focusing on modern, well-equipped warehouses that can accommodate the growing needs of e-commerce and logistics companies. There is a definite interest in the mining sector and activity has been high in these nodes.

3. Sustainability and Technology Integration

Environmental sustainability and technology integration have emerged as key trends in the commercial property market. There has been a growing demand for green buildings that are energy-efficient, environmentally friendly, and resource-efficient. Developers and investors are increasingly incorporating sustainable design features, such as solar panels, green roofs, and water-saving systems, into their projects.

Technology integration has also been a focus, albeit mainly in the major centres, with the adoption of smart building solutions to enhance operational efficiency, reduce costs, and improve the tenant experience. Smart buildings equipped with IoT devices, sensors, and automation systems are becoming increasingly common, providing real-time data on energy usage, occupancy levels, and building performance.

Outlook for 2024

Looking ahead to the rest of 2024, several trends are expected to shape the South African office and industrial property markets.

1. Continued demand for flexible office spaces as well as smaller office units

The trend towards flexible office solutions is expected to continue in 2024, as companies embrace remote and hybrid work models. Coworking spaces, serviced offices, and hybrid workspaces will remain popular, offering flexibility and cost-effectiveness for businesses of all sizes. We anticipate the requirement for smaller office space to continue unabated during 2024 as smaller businesses grow and expand into formalised space.

2. Growth in the Industrial Sector

The industrial property sector is expected to see continued growth in 2024, driven by the expansion of e-commerce, logistics, and distribution networks. Demand for well-located industrial properties near major transport hubs will remain high, as companies seek to optimize their supply chains and improve last-mile delivery capabilities. We anticipate the major centres of Gauteng and Cape Town to continue with demand for industrial space and we do not expect the stock supply in high-demand areas to improve until such time as the demand to supply ratio has driven rental prices to a point that developers re-enter the market with new projects.

In conclusion, the South African office and industrial property markets are expected to continue evolving in 2024, driven by changing work dynamics, political events, emerging trends, and evolving tenant preferences and budgets. By embracing flexibility, sustainability, technology, and wellness, property owners and developers should be able to capitalize on emerging opportunities and navigate the evolving landscape successfully.

which includes our industrial and office market rental achieved/sqm

Craig McFadyen

Principal Broker

Email: craig@oriprops.co.za