The South African commercial real estate market has surged to nearly R2-trillion, and if reforms persist, interest rates continue to lower and key metros stabilise, a long-awaited commercial property boom could follow.<\/p>\n\n\n\n
This is the data and view provided by Gmaven, a provider of real estate software and data services.<\/p>\n\n\n\n
Despite the Covid-19 pandemic, inflation-fighting interest rates and slow economic growth, South Africa continues to boast the largest commercial real estate (CRE) industry in Africa. <\/p>\n\n\n\n
According to Gmaven, the value of South Africa’s CRE market reached R1.92-trillion as of 30 June 2023, reflecting a significant 48% increase from the R1.3-trillion recorded in 2015 when official data was first released by the Property Sector Charter Council.<\/p>\n\n\n\n
\u201cThis new data underscores the resilience of South Africa\u2019s commercial real estate sector (particularly the industrial and retail categories) and highlights opportunities for investment, future growth and strategic decision-making,\u201d said Will Harris, CEO of Gmaven.<\/p>\n\n\n\n
However, Harris said the R1.92-trillion market value is derived from the annual financial statements of South African municipalities thus this value is likely understated.<\/p>\n\n\n\n
This is because it excludes state and municipal-owned commercial properties, as well as hospitals, hotels, schools, and multi-dwelling residential properties. Further, municipal commercial property values often fall below market value.<\/p>\n\n\n\n
\u201cMunicipalities rely heavily on property rates and taxes for revenue, making them highly motivated to ensure property values are accurate,” said Harris.<\/p>\n\n\n\n
“Simultaneously, property owners are incentivised to keep those values in check, as inflated assessments lead to higher tax bills [and] this dynamic fosters a natural accuracy in the data \u2013 data that reflects the entire commercial property landscape of the country,\u201d he added.<\/p>\n\n\n\n
Regardless, looking at the R1.92 trillion figure, with an exchange rate of ~R18 to the dollar, South Africa’s per capita CRE value is ~$1,800 (R32,800), lower than the UK’s ~$26,600 (R485,270) with a similar population.<\/p>\n\n\n\n
According to the data, listed property owners hold around R400 billion of the R1.92 trillion CRE value.<\/p>\n\n\n\n
South Africa\u2019s largest listed property fund, Growthpoint Properties, reported assets valued at R70.5 billion, followed closely by Redefine Properties at R64.7 billion.<\/p>\n\n\n\n
Gmaven noted that, aside from the listed sector, most market value is held by owner-occupiers, private owners, and pension\/life funds. <\/p>\n\n\n\n
High-density areas like Gauteng and the Western Cape dominate the market, while provinces like Mpumalanga and Limpopo, with lower per capita values due to less urbanisation, have seen recent retail growth and offer future opportunities.<\/p>\n\n\n\n
Why the commercial real estate value is important<\/strong><\/p>\n\n\n\n Gmaven said that grasping the value of South Africa’s commercial real estate market is essential for a variety of economic decisions, from infrastructure spend, to rental projections, taxation, and energy consumption.<\/p>\n\n\n\n Harris said understanding the true value of South Africa\u2019s commercial real estate market is essential for businesses, policymakers, and investors.<\/p>\n\n\n\n \u201cBy gaining a comprehensive understanding of the R1.92-trillion CRE market, businesses can make more informed decisions, municipalities can optimise revenue management, and major economic actors can strategise for sustainable growth,\u201d said Harris.<\/p>\n\n\n\n To effectively analyse CRE market value, the Gmaven CEO said that it is important to consider properties by grade (Premium, A, B, or C-grade), category (office, industrial, retail and other), and size or gross lettable area.<\/p>\n\n\n\n