#BizTrends2025: Commercial property turns the corner

Source: Supplied. John Jack, chief executive officer of Galetti Corporate Real Estate.

The growth of South Africa’s industrial and logistics sectors, huge demand in the Western Cape, the ongoing formal return to offices and increased adoption of green energy were some of the trends that we observed in 2024.

While load shedding reduced considerably, reports suggest that South Africa will soon become the tenth largest photovoltaic market in the world, making businesses more resilient and putting the power in the private sector’s hands.

Looking ahead, the current momentum will boost the industry’s performance into the New Year. It’s been a few hard years, but we are now turning a corner.

Here are five trends set to shape the industry:

1) Western Cape dominance

Supported by efficient infrastructure, good governance, it’s central location to one of the country’s major ports and its many lifestyle benefits, the Western Cape has once again affirmed its place as the strongest contender in South Africa’s commercial real estate landscape.

The Western Cape continues to dominate across all asset classes with Cape Town’s office sector recording its lowest vacancy rate in 15-years this year. There’s very little space available and with demand on an all-time high, prices are higher and yields are greater. It will be interesting to see how this plays out, and ramps up next year as demand continues to outstrip supply.

2) Formal return to the office

The latest Rodes Report (Q3: 24) highlighted a decrease in office vacancy rates to 13.3% (down by 1.1% year-on-year), with Cape Town and Durban driving the recovery.

Companies like Nedbank and Vodacom are reinstating mandatory return to work protocols and we expect more companies to follow suit. We have noted also more enquiries for office space and bigger footprints, and there is also more activity taking place in the co-working space.

Jack shares that contrary to popular belief, Johannesburg’s commercial property market is on the up. There are strong signs of growth in Johannesburg, particularly in areas like Waterfall and Rosebank as the reverse semigration (and reverse emigration) trend continues.

3) REITs continue to rise

Following a few challenging years, REITs fought back with property stocks surging by more than 50%. In 2025, we expect REITs to continue their strong rebound, although at a steadier pace.

4) Reinvention of spaces

Jack shares that 2025 is set to see more demand across industrial, office, retail and logistics asset classes, particularly in the likes of Cape Town where there is very little real estate available.

As a result, we expect to see more suburban property conversions, unused retail spaces and even cinemas being converted into offices to accommodate demand. These investments will also benefit the construction sector which has been one of the hardest hit since the pandemic.

5) Public-private sector partnerships

There is a critical need for reliable infrastructure, security and logistics to attract investors. In 2025, more public-private partnerships will help bridge the gaps where government falls short.

In the past, private developers in Johannesburg were building their own roads and even installing their own sewerage and water plants. This cannot continue. There needs to be more collaboration and I do believe that the government is open to more collaboration to deliver positive growth in 2025.

With reduced interest rates in play and a few more rate-cut announcements on the cards, I believe that the industry will work together to drive further momentum and restore the sector to its former glory.

After several challenging years—even before the pandemic—there is a renewed sense of optimism and collaboration. We expect that 2025 will accelerate the recovery of the sector and strengthen the financial standing of many landlords.