A significant rejuvenation in the office market is expected this year, with property demand and supply turning in favour of landlords.
This is according to commercial real estate agency Cushman and Wakefield Broll, which said increased office space take-up and rental growth will be driven by solidified hybrid work policies and the re-emergence of new developments.
The agency’s MD Calvin Crick said most companies were leaving the uncertainty over work-from-home policies behind, with most employees in the country expected to return to the office. “Firmer hybrid working policies are likely to stabilise office occupancy, with the benefit of a clearer, more consistent demand profile enabling strategic office space management.”
Many companies adopted work-from-home policies after the world was hit by a global pandemic in 2020, leading to social distance regulations and rules against large crowds being in the same space.
Locally, the sector was among the hardest hit, as this led to a huge decline in demand for office space. According to the South African Property Owners Association (Sapoa), in the third quarter of 2020, office vacancies reached a 16-year high at 12.7% for the first time since 2008. At the same time, the sector had the weakest year-on-year changes since 2013.
Experts argued that Gauteng office vacancies in areas such as Rosebank and Sandton suffered due to overdevelopment. As a result of continued remote work, hybrid work and the lasting effects of the pandemic, the sector experienced a slow recovery, with office vacancies sitting at 13.7% five years after the global pandemic.
Between 2022 and 2024, the vacancy rate was on a downward trajectory, consistently decreasing every quarter — despite a slight uptick in vacancies in the last quarter of 2024 from 13.6% to 13.7%.
Meanwhile, growth in asking rentals accelerated to 2.2% year on year. Sapoa said while this was well below inflation, it may signal that overall supply and demand were edging closer to equilibrium.
Crick said while employee office occupancy had increased, it remained lower than it was five years ago. He added that the need to compete with the flexible of work-from-home presented a challenge in retaining talent. To mitigate this, he said property developers and landlords needed to transform office spaces to allow flexibility and add amenities such as gyms, cafés and conference centres.
We expect that demand for commercial office space will rise in 2025. This will lead to reduced office vacancies, the possibility of real rental growth, and a shift towards market equilibrium
— Angus Murray, head of tenant representation at Cushman & Wakefield | Broll
“Companies must create enticing office spaces and align them with organisational needs, ensuring roles that require in-office presence are well supported. Adopting a well-defined hybrid strategy and matching it with the appropriate real estate and workplace solutions is crucial for overall operational efficiency,” he said.
Crick added that the shift towards flexible workspaces, emphasising collaboration over individual work stations, helps to optimise office size, enhance the employee experience and support business goals.
Angus Murray, head of tenant representation at Cushman & Wakefield | Broll, said the market was this year likely to favour landlords over tenants. “We expect that demand for commercial office space will rise in 2025. This will lead to reduced office vacancies, the possibility of real rental growth, and a shift towards market equilibrium, and away from the tenants’ market that has dominated the office property sector market in recent years.”
He said this could also trigger new developments, especially in areas where demand exceeded supply. However, he added that office tenants were likely to experience increased real estate costs as negotiating favourable rental terms would be more challenging when less office space was available.
“Operating in a more positive market environment after years of stagnation is an exciting prospect. We recognise the challenges of a competitive negotiation landscape and fewer opportunities for achieving cost-of-occupancy savings. To address this, it is imperative to have early engagements with landlords and strategic planning ahead of lease expiries,” said Murray.
At an economic level, South Africa’s improved political stability, suspension of load-shedding, and lower interest rates are providing a supportive environment and the clarity needed for businesses to advance real estate strategies, he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.