what to look for when investing in south african commercial property

Commercial property can offer significant long-term returns and portfolio diversification, but success in this market is rarely accidental. Whether youre a seasoned investor or exploring development opportunities for the first time, understanding what to look for ' and what to avoid ' is essential in building a resilient and profitable portfolio. Paul Stevens, CEO of Just Property, offers a guide to the core considerations when investing in South Africas commercial real estate.

Location remains a fundamental driver of commercial property value but this goes beyond the old mantra of position, position, position�. In 2025, its not just about visibility or accessibility; its about anticipating where investment is heading and aligning with that momentum.

Look out for areas undergoing infrastructure upgrades, precinct developments or special economic zone designations. For example, the Westown precinct in Shongweni, KwaZulu-Natal, is transforming into a major lifestyle and commercial node with the support of eThekwini Municipality and the private sector. Projects like these bring in roads, fibre connectivity, water security and power infrastructure ' the kind of groundwork that makes a location viable for decades.

Cape Town continues to outperform much of the country in terms of governance, safety and service delivery. The Western Cape governments consistent investment into transport corridors, clean energy and urban regeneration has translated into increased investor confidence and steadily declining vacancy rates in prime office and mixed-use nodes.

Vacancy rates are a leading indicator of demand. High vacancies put pressure on rental growth and may suggest an oversupplied or underperforming submarket. Conversely, low vacancy rates can support stronger rental escalations and indicate a more competitive tenant pool.

In the office sector, for example, were seeing a recovery in key urban centres. Prime office space in Cape Towns CBD and decentralised nodes such as Century City is approaching historically low vacancy levels, after a sustained period of contraction and hybrid work adjustments .

In contrast, retail is becoming increasingly bifurcated (split into separate and distinct parts). High foot-traffic neighbourhood convenience centres remain resilient, but large-format shopping malls are under pressure from changing consumer behaviour, e-commerce and rising operating costs. If youre considering investing in retail, look for assets that offer a mix of essential services, grocery retail and lifestyle offerings ' and pay close attention to tenant composition and turnover.

If theres one segment thats consistently outperformed over the past five years, its industrial. The pandemic-era acceleration of e-commerce created a structural need for warehousing, last-mile logistics and flexible distribution facilities. That demand hasnt waned. In fact, it has matured into a broader trend.

According to the Rode Property Report, as reported in Property Wheel, nominal gross market rentals for South Africas industrial space of 500m2 grew by 6.7% in Q4 2024 compared to Q4 2023 with rentals approximately 23% higher than the pre-pandemic levels in 2019�. The take-up was driven by logistics providers, FMCG distributors and manufacturing operators seeking modern, energy-efficient premises close to key transport routes.

When assessing industrial property opportunities, proximity to arterial roads, ports and freight hubs is vital. So too is flexibility of use ' a building designed for one tenant type is more risky than a multipurpose facility that can serve several industries. Green features like solar PV and rainwater harvesting are increasingly not just value-adds, but requirements.

Development-led investors should be looking for land with the right zoning already in place ' or with realistic prospects of rezoning. Land banking in areas earmarked for future expansion can yield strong returns, but only if the right groundwork has been done.

Understanding bulk rights, building lines, parking ratios and environmental overlays is essential. So is engaging early with municipal planning departments to understand precinct plans, transportation frameworks and timelines for service rollouts.

The redevelopment of underutilised commercial buildings is another emerging trend, particularly in older business districts. However, retrofitting comes with its own risks ' compliance with new energy and fire regulations, heritage approvals or the cost of upgrading old systems to modern standards. These projects can be highly lucrative, but they require detailed feasibility studies and the right professional team.