CIARAN RYAN: The health of commercial real estate is tied to overall economic activity, and 2023 was a tough year for the sector. Last year we saw total direct commercial property investment increase 3% to R17.2 billion, which is below the historic five-year average of R19.1 billion. That’s according to a recently released South African investment review by JLL Africa.
CIARAN RYAN: Reading through the reports, I noticed the Western Cape is achieving record activity levels. How are we doing elsewhere in the country, and are we seeing the impact of semigration on the property market? CIARAN RYAN: The one point that astonished me is the Western Cape – the jump in market share from – was it 10%? – to 25% of the total country’s property transaction value. Why is that?
CIARAN RYAN: Right. So it does seem – and you say this in the report – that the level of activity is very much governed by economic growth, And with economic growth in the Western Cape being higher, one would expect to see some uptick there. And in the last year, between 2022 and 2023, the total investment volume increased by 15%. But the number of deals is much higher, which means there are smaller transactions happening – which is a consequence of smaller funds and owner-occupiers buying properties – much more than in the past.
And it’s been coming off year on year. It’s sort of a perfect storm in the sector, really. Large corporates, after Covid, have seen that return to work has been somewhat slow. They don’t require as much base as they used to. We’ve also seen a large amount of supply come onto the market in the South African office market, somewhat oversupplied at the time of Covid and it hasn’t really recovered since.
CIARAN RYAN: Going back to Covid again, one of the findings in the report is that alternative property investments are doing quite well. When we talk ‘alternatives’ I’m talking here about student accommodation, the filling stations, and the data centres which you’ve just been talking about. Why is that? Why is ‘alternative’ picking up so much of the slack?
Will a secondary market emerge whereby data centres are disposed of with leases in place, and traded? If the developed markets are anything to go by, yes, but that’s some way off.
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