Higher rental yields, longer leases and fewer vacancies make commercial property a strategic investment. But before you dive in, know what to seek and what to skip. The Covid-19 pandemic brought with it a period of exceptional stress in 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, and in 2024, off the back of 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 (up by 34% since 2023).
On 27 May 2025, the South African Property Owners Association (SAPOA) noted that Global property investment returns rebounded strongly in the twelve months to December 2024, marking the end of a two-year downturn according to SAPOAs 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, he says, depends upon making informed decisions and avoiding speculation.
So, what should potential investors look for and what should they avoid?
Location, location, location
As is true of residential property, location is a key factor in the value of commercial property. But in the modern context, this is about much more than just visibility and access. Its crucial to identify where investment is growing and align with that momentum, says Stevens. In South Africa, the Western Cape continues to lead the charge in terms of governance, safety and service delivery but in general, l investors should look out for infrastructural upgrades, new business precinct developments and special economic zone status' designated areas set aside for specific economic activity and emerging growth nodes.
Vacancy ratesWhen it comes to commercial property, vacancy rates are a key indicator of market health, and tracking them helps investors and property owners to anticipate changes in demand and rental growth, empowering them to make informed choices regarding buying, selling or developing property. Low vacancy rates are an indicator of good market health: a strong demand means most spaces are occupied, which can lead to higher rentals and increased investment activity. Conversely, high vacancy rates suggest either an oversupplied market or a weak demand. This puts pressure on rental growth, often forcing property owners to either reduce rentals or offer concessions to secure tenants.
SAPOAs Office Vacancy Report Q1 2025 notes that South Africas 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, says Stevens, with prime Cape Town CBD and Century City spaces nearing record-low vacancies following a prolonged post-pandemic downturn in the face of the remote work trend and hybrid work shifts. Johannesburg Metro remains the city with the highest overall office vacancy rate, according to SAPOAs report.
The retail landscape, says Stevens, is sharply divided. SAPOAs Retail Trends Report 2025Q1 notes that 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 centers with strong foot traffic continue to thrive. Large malls, however, face challenges from shifting shopping habits, online competition and higher costs. For retail investments, investors should prioritise properties with essential services, grocery and lifestyle tenants, and closely monitor tenant mix and turnover.
SAPOA reports that Vacancy rates across major centres improved significantly from the 2021 peak, ending Q1 2025 at 4.9% ' up slightly from 4.5% in Q4 but well below the March 2021 high of 7.1%. Gross rental growth remained positive at 3.7% YoY, compared to 3.1% in the previous quarter, as landlords faced reduced pressure to offer discounts. Community centres led the improvement with a drop from 4.1% to 3.9%.