Standard Bank Spots Promising Signs in the South African Property Market

The year has begun with significant volatility. Global markets have experienced notable fluctuations, influenced by changing geopolitical landscapes and ongoing instability stemming from persistent macroeconomic challenges. It’s surprising how swiftly the first quarter has concluded.

The South African real estate sector is not immune to these broad trends. Often overlooked and considered a monolithic entity, this market 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 accommodations, among others.

Performance varies across these categories. Being the largest bank in Africa by assets (R3.3 trillion as of FY 2024), Standard Bank diligently monitors and assesses real estate trends. Despite existing macroeconomic challenges, the sector has shown impressive resilience.

Alongside global influences, the real estate market is grappling with persistently elevated interest rates, the enduring aftermath of the post-Covid-19 recovery, and subdued domestic growth in South Africa. These factors have affected each asset class in distinct ways.

Office trends

Office rentals have demonstrated surprising resilience. The national weighted decentralised vacancy rates for grades A+, A, and B office spaces decreased to 12.6% in Q4 2024, down from 14.4% in Q4 2023.

As hybrid working fatigue sets in, the shift back to physical offices is gaining momentum, with companies prioritizing in-person collaboration. Globally, firms like Amazon, IBM, JP Morgan Chase, Tesla, Zoom, and Google have implemented return-to-office policies.

Similarly, locally, more businesses are encouraging employees to return to the office, recognizing benefits 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 recovery. Foot traffic and occupancy rates have exceeded pre-pandemic levels in several key African markets. This asset class is also enjoying low vacancy rates (5.5% FY 2024) and an increased implementation of solar PV initiatives to manage operational costs.

In response to these trends, Standard Bank has recently issued a renewable bond aimed at facilitating access to affordable sustainable funding for such initiatives, easing the strain on electricity grids. Moreover, an increase in urban consolidation has led to innovative precinct developments that integrate residential, retail, and cultural spaces into harmonious environments.

Residential trends

The persistent structural deficit of affordable housing in the country remains a significant 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, encompassing 6.91 million properties.

Residential assets represent 89.3% of total property volume, highlighting their significance in household wealth. Notably, government-subsidised housing (GSH) accounts for 32% of total residential units, approximately 2.18 million homes. This points to substantial potential for scalable investment and impact.

Standard Bank is committed to supporting 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, a rise in investment in build-to-rent and build-to-sell developments, and an upward trend in rental yields.

Industrial trends

The industrial sector stands out as the top performer across the board. This asset class benefits from the rise in e-commerce, the reshoring of supply chains, and robust demand for warehousing solutions.

Vacancy rates have dropped by 2.1%, and rental growth has exceeded 5% year-on-year. Additionally, there is a noticeable increase in tenant-driven developments and sale-and-leaseback structures, enabling manufacturers to maintain focus while unlocking capital for core operations.

Alternative Assets

Data centers, cold storage, and student housing are emerging as vital sub-sectors. Their growth reflects evolving technology, food logistics, and urbanization, indicating new investment prospects.

Relevance of physical real estate

According to Standard Bank’s internal estimates, the South African commercial real estate sector is valued at approximately R1.9 trillion, marking a notable increase from the R1.3 trillion recorded in 2015, highlighting the sector’s progression over the past decade.

Combined with the estimated value of the residential property market (R6.9 trillion), the total market size exceeds R8.8 trillion (as of the end of 2024). It’s essential to recognize that these valuations may not encompass the entire market, as certain sectors like government-owned properties, hospitals, hotels, and multi-dwelling residential units may be underrepresented in municipal data.

This significant figure underscores the lasting importance of physical real estate assets, even as digital and virtual platforms gain prominence.

The future of real estate in Africa

While we acknowledge the trends within physical real estate, we also appreciate the advantages of digitization. It has proven to be an essential element in meeting client demands.

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

Striking a balance between innovation and tradition will be vital in the foreseeable future. At Standard Bank, we are dedicated to supporting our clients through various market cycles with clarity, precision, and a long-term perspective. We believe that real estate plays a central role in nurturing 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 collaborate with like-minded clients who view Africa’s success as integral to global prosperity. Our Group’s mission is embodied 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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