Higher rental yields, longer leases, and fewer vacancies make commercial property a strategic investment. But before you dive in, it’s crucial to know what to seek and what to avoid.
The Covid-19 pandemic brought a period of exceptional stress to the commercial property industry, characterised by high vacancies, an increase in distressed sales, and, understandably, a healthy dose of investor caution.
Since then, the sector has shown remarkable resilience. In 2024, following the formation of the Government of National Unity (GNU), the easing of load-shedding, and declining interest rates, investment volumes soared to more than R27 billion — a 34% increase compared to 2023.
On 27 May 2025, the South African Property Owners Association (SAPOA) noted:
“Global property investment returns rebounded strongly in the twelve months to December 2024, marking the end of a two-year downturn according to SAPOA’s Global Property Trends Report for FY2024. Performance across countries varied with total returns ranging between -0.8% in Australia to 11.5% in South Africa – the top global performer for the year.”
“Commercial property can offer significant long-term returns and portfolio diversification but success in the market is rarely accidental,” says Paul Stevens, CEO of Just Property. Success depends on making informed decisions and avoiding speculation.
Location, Location, Location
As with residential property, location is key in commercial property valuation. In the modern context, location is about much more than visibility and access — it’s crucial to identify where investment is growing and align with that momentum, says Stevens.
In South Africa, the Western Cape continues to lead in governance, safety, and service delivery. Investors should also look for infrastructural upgrades, new business precinct developments, and special economic zone status — areas designated for specific economic activity and emerging growth nodes.
Vacancy Rates
Vacancy rates are a key indicator of market health. Tracking them helps investors anticipate changes in demand and rental growth, empowering better decisions about buying, selling, or developing property.
Low vacancy rates indicate strong demand, higher rentals, and increased investment activity.
High vacancy rates suggest oversupply or weak demand, which can pressure rental growth and force property owners to offer concessions.
SAPOA’s Office Vacancy Report Q1 2025 notes:
“South Africa’s office vacancy rate edged down marginally to 13.6% in the first quarter of 2025 … Prime-grade offices led the recovery, with vacancies dropping by 80 basis points to 6.8%, its lowest level since the vacancy peak in mid-2022. A-grade offices experienced a marginal increase of 20 basis points, rising to 12.2%, while B-grade vacancies remained flat at 16.8%. C-grade space recorded a slight improvement of 10 basis points, easing to 15.8%.”
The office sector is rebounding in major urban hubs, with prime Cape Town CBD and Century City spaces nearing record-low vacancies following the post-pandemic remote and hybrid work shifts. Johannesburg Metro, however, remains the city with the highest overall office vacancy rate.
The retail landscape is sharply divided. SAPOA’s Retail Trends Report 2025Q1 notes:
“Trading density reached a record high of R42,374 sqm, now 22% above its pre-pandemic peak. While growth momentum is moderating, retail turnover is still outperforming broader economic indicators and remains a positive signal for landlords and investors.”
Neighbourhood convenience centres with strong foot traffic continue to thrive, while large malls face challenges from shifting shopping habits, online competition, and higher costs. Investors should prioritise retail properties with essential services, grocery and lifestyle tenants, and monitor tenant mix and turnover closely.
SAPOA reports that vacancy rates across major centres improved from the 2021 peak, ending Q1 2025 at 4.9%, slightly up from 4.5% in Q4 but well below the March 2021 high of 7.1%. Gross rental growth remained positive at 3.7% year-on-year (YoY), compared to 3.1% in the previous quarter. Community centres led this improvement, dropping from 4.1% to 3.9%.
Industrial for the Win
Industrial real estate is a hot commodity in South Africa. The growing demand from e-commerce, logistics, and manufacturing sectors points to a bright future.
According to the Rode State of the Property Market Report Q1 2025, industrial property outperforms office and retail sectors, with strong rental growth and low vacancy rates. Nominal gross market rentals for industrial space of 500m² grew by 7.3% in Q1 2025 compared to Q1 2024, exceeding the 6.7% recorded in Q4 2024.
When evaluating industrial property, proximity to major roads, ports, and freight hubs is essential for efficient logistics. Stevens recommends choosing buildings suitable for multiple tenants, as single-use facilities are more vulnerable to shifts in demand. Features like solar power and rainwater harvesting are increasingly standard requirements, reflecting growing sustainability expectations.
MSCI data supports this trend: certified office buildings can be more profitable, and stakeholders in sustainable finance are increasingly prioritising these assets, says Georgina Smit, Head of Technical at the Green Building Council of South Africa.
Zoning and Development Potential
Owning land in growth areas can be profitable, but due diligence is essential. Stevens advises prioritising land with existing zoning or a high likelihood of rezoning. Understanding bulk rights, building lines, parking requirements, and environmental constraints, along with early engagement with municipal planning departments, clarifies precinct plans, transport networks, and timelines for essential services.
Transforming outdated commercial properties in established areas is increasingly popular. While renovations can be profitable, they also require careful planning to meet updated fire and energy codes, obtain heritage permits, and modernise ageing infrastructure.
Staying Informed
Commercial property is cyclical, with different asset classes performing differently depending on market timing. Understanding these dynamics helps investors ride upswings and avoid over-exposure during downturns.
A thorough grasp of the regulatory landscape — from building compliance and zoning requirements to tax obligations — is crucial. Staying updated on legislation such as the Property Practitioners Act and local municipal bylaws is also essential.
“Ultimately, the commercial property market rewards those who invest with insight rather than speculation. Success hinges on diligent research: understanding market cycles, targeting areas with robust fundamentals and working alongside seasoned commercial brokers to identify opportunities and unlock lasting value,” says Stevens. By taking a measured, data-driven approach grounded in local expertise and current sector trends, investors can uncover compelling opportunities right here, and right now.
RESOURCES
* JLL South African Investment Review: www.jll.com/en-us/insights/market-perspectives/south-african-investment-review
* Gauteng: Tips for Investing in Commercial Property: www.gauteng.net/whats-on-g/tips-for-investing-in-commercial-property/
* Market Report Analytics: South Africa Commercial Real Estate Market: www.marketreportanalytics.com/reports/south-africa-commercial-real-estate-market-91976#summary
* Property24: What to Look for When Investing: www.property24.com/articles/what-to-look-for-when-investing-in-south-african-commercial-property/32639
* Zawya: Top Tips for Investing in 2025: www.zawya.com/en/economy/africa/investing-in-south-african-commercial-property-top-tips-for-2025-eqtmjagk
* Daily Investor: Mistakes to Avoid: www.dailyinvestor.com/property/90354/one-mistake-south-african-property-investors-should-avoid/
* Landlords Association: Commercial vs Residential Property: www.landlordsassociation.co.za/is-it-best-to-invest-in-commercial-property-or-residential-property/
