New data has shown the value of SA’s commercial real estate market surged 48% to R1.92-trillion from 2015 to the end of June 2023, according to Gmaven, a provider of real estate software and data services.
This growth shows the sector’s resilience despite challenges such as the Covid-19 pandemic and slow growth. However, with lower interest rates and stabilising key metros, SA’s commercial real estate, the largest in Africa, could see further growth if recent policy and economic reforms continue.
Gmaven CEO Will Harris said: “This new data underscores the resilience of SA’s commercial real estate sector (particularly the industrial and retail categories) and highlights opportunities for investment, future growth and strategic decision-making.”
The latest midyear reports from the SA Property Owners Association (Sapoa) Global Property Trends and Valuations indicate SA’s property market is showing signs of recovery, with improvements in transactional activity, rental growth and investor confidence. Retail properties are driving the recovery, with trading densities outpacing inflation and rent-to-sales ratios staying healthy at about 7%.
However, Gmaven cautions that at an exchange rate of R18/$, SA’s commercial real estate market is worth $110bn, with a per capita value of $1,800. In contrast, the UK’s market is worth $1.78-trillion, giving it a per capita value of $26,600. This highlighted the stark difference in the commercial real estate sectors of the two countries.
According to Gmaven’s data, listed property owners hold R400bn of the R1.92-trillion. The latest figures show that Growthpoint Properties, the country’s largest listed property fund, holds assets worth R70.5bn, followed closely by Redefine Properties at R64.7bn.
Excluding the listed sector, most of the market value is held by owner-occupiers, private owners, and pension and life insurance funds. High-density metros such as Gauteng and the Western Cape dominate the market, while provinces such as Mpumalanga and Limpopo, with lower per capita values due to less urbanisation, have seen recent retail growth and offer future opportunities.
Harris said the total market value, derived from 213 SA municipalities’ financial statements, was likely to be understated, as it excluded state and municipal properties such as hospitals, hotels, schools and multi-dwelling units. Municipal commercial properties also tended to be valued below market prices.
“Municipalities rely heavily on property rates and taxes for revenue, making them highly motivated to ensure property values are accurate. Simultaneously, property owners are incentivised to keep those values in check, as inflated assessments lead to higher tax bills. This dynamic fosters a natural accuracy in the data — data that reflects the entire commercial property landscape of the country,” Harris, said.
When municipalities overvalued properties it could discourage investment in the sector unless the higher taxes were accompanied by improved service delivery, he said.
A perfect example was the Western Cape’s growth and declines in other metros — property values followed supply and demand, he said. Improved local government services attracted residents and businesses, driving capital inflows values.
Macro factors such as lower interest rates and the government of national unity’s potential to improve services and investor confidence could boost SA’s commercial property market, Harris said.
While on a micro level, property values were driven by income potential, including higher rental income, lower vacancy rates, and innovative revenue streams like solar power. Lower operational costs, such as rates and security, also increased profitability and therefore values, he said.
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