Standard Bank Sees Positive Signs in the South African Property Market

The year has begun with significant volatility. We’ve witnessed substantial fluctuations in global markets, shifting geopolitical dynamics, and ongoing instability driven by persistent macroeconomic challenges. It’s quite striking to acknowledge that the first quarter has already drawn to a close.

The South African real estate sector isn’t immune to these general trends. Often underestimated and perceived as a singular entity, it actually comprises a diverse range of distinct asset classes: office, retail, residential, industrial, and alternative real estate assets, such as data centers, cold storage facilities, and student housing, among others.

Performance has varied across these categories. As Africa’s largest bank by assets (R3.3 trillion as of FY 2024), Standard Bank actively monitors and analyzes trends in real estate. Despite macroeconomic obstacles, the sector has demonstrated remarkable resilience.

Beyond global pressures, the real estate market is contending with persistently high interest rates, the lingering aftermath of the post-Covid-19 recovery, and subdued domestic growth within South Africa. Each of these factors has uniquely impacted the various asset classes.

Office trends

Office rentals have shown unexpected resilience. The national weighted decentralized vacancy rates for Grade A+, A, and B office spaces decreased to 12.6% in Q4 2024, down from 14.4% in Q4 2023.

The shift back to physical offices is gaining momentum as hybrid work fatigue sets in and companies prioritize in-person collaboration. Globally, firms like Amazon, IBM, JP Morgan Chase, Tesla, Zoom, and Google have implemented return-to-office mandates.

Locally, a similar trend is emerging: more companies are encouraging employees to return to offices, driven by advantages such as faster onboarding for new hires, enhanced collaboration, and more effective strategic planning and execution.

Retail trends

The retail sector has experienced a remarkable revival. Foot traffic and occupancy rates have now surpassed pre-pandemic levels in several key African markets. This asset class is also witnessing low vacancy rates (5.5% FY 2024) alongside an increasing adoption of solar PV initiatives to manage operational costs.

Recognizing these trends, Standard Bank has recently launched a renewable bond aimed at providing access to affordable sustainable funding for these projects, thereby alleviating pressure on electricity grids. Moreover, we have seen an increase in urban consolidation, leading to innovative precinct developments that integrate residential, retail, and cultural spaces into cohesive environments.

Residential trends

The ongoing structural deficit of affordable housing in the country remains a challenge. According to the Centre for Affordable Housing Finance in Africa, the total value of South Africa’s residential property market reached R6.9 trillion in 2024, comprising 6.91 million properties.

Residential assets account for 89.3% of the total property volume, highlighting their significance in household wealth. Notably, government-subsidised housing (GSH) constitutes 32% of total residential units, approximately 2.18 million homes. This illustrates significant potential for scalable investment and impact.

Standard Bank continues to support clients like Calgro M3 with sustainable finance solutions to enhance developments such as the Bankenveld District project in Sandton.

Encouragingly, the residential market is seeing lower vacancy rates, increased investment in build-to-rent and build-to-sell projects, and a steady uptick in rental yields.

Industrial trends

The industrial sector stands out as the top performer overall. This asset class reaps the benefits of the e-commerce boom, the reshoring of supply chains, and a strong demand for warehousing solutions.

Vacancy rates have dipped by 2.1%, and rental growth has exceeded 5% year-on-year. Additionally, we’re noticing a rise in tenant-driven developments and sale-and-leaseback arrangements, enabling manufacturers to maintain focus and unlock capital for core operations.

Alternative Assets

Data centers, cold storage, and student housing are emerging as strategic sub-sectors. Their expansion reflects shifts in technology, food logistics, and urbanization, indicating new investment opportunities.

Relevance of physical real estate

According to internal estimates from Standard Bank, the South African commercial real estate sector is valued at around R1.9 trillion, a considerable increase from R1.3 trillion in 2015, underscoring the sector’s growth over the past decade.

When combined with the estimated value of the residential property market (R6.9 trillion), the total market size surpasses R8.8 trillion (as of the end of 2024). It’s important to note that these valuations may not fully encapsulate the entire market, as certain segments like government-owned properties, hospitals, hotels, and multi-dwelling residential units might be underrepresented in municipal data.

This significant figure underscores the persistent importance of physical real estate assets, even as digital and virtual platforms become increasingly prevalent.

The future of real estate in Africa

While we recognize the trends in physical real estate, we also appreciate the benefits of digitization. It has proven essential in addressing client needs.

However, for many across the continent, physical infrastructure remains crucial. Whether visiting a favorite retail store, collaborating in an office, or residing in secure housing, real estate continues to shape our daily experiences.

Striking a balance between innovation and tradition will be vital moving forward. At Standard Bank, we are committed to supporting our clients throughout various market cycles with clarity, precision, and a long-term vision. We believe that real estate is fundamental in fostering Africa’s economic future.

The ancient Greeks defined excellence as “a state of being at the highest possible level, encompassing both physical and moral qualities.”

In this spirit, we continue to partner with like-minded clients who view Africa’s prosperity as integral to global success. Our Group’s purpose is realized in our daily operations: “Africa is our home, and we drive her growth.”

* Simon Fiford is Senior Vice President of Real Estate Coverage at Standard Bank.

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