Where to find value in South Africa’s commercial property market

The commercial property sector in South Africa has been navigating through challenging times due to the impact of the COVID-19 pandemic and civil unrest. John Loose, a commercial property economist at FNB, sheds light on the current state of the sub-sectors within the commercial property market. According to Loose, the industrial property segment has shown the most improvement, with declining vacancy rates and strengthening values. On the other hand, the retail sector has also improved significantly but is still facing challenges in recovering to pre-COVID levels. The office sector remains the underperformer, with high vacancy rates and the impact of remote work trends. The capital values have seen a decline overall, with the office sector experiencing the most significant drop. However, there is hope as some sub-sectors are showing signs of positive growth, particularly industrial properties. The conversation also delves into the investment strategies of Akani Properties, with Zamani Letjane emphasizing the importance of strategic property acquisitions in key locations. Letjane highlights the focus on convenience properties that cater to community needs and national tenants to protect assets. Looking ahead, the discussion explores the potential for residential conversions of office spaces, the impact of rising interest rates on commercial property, and the threat of digital retail on traditional brick-and-mortar businesses. Loose predicts that the industrial sector will lead the way in 2022, benefiting from logistics growth and online retail trends. Retail is expected to see mild positive growth while the office sector continues to face challenges with remote work and job losses in financial services. Letjane shares a bullish outlook for commercial property developments, focusing on areas with growing residential demand and upcoming hospitality ventures. The interview concludes with a glimpse into the future of the commercial property market in South Africa, hinting at opportunities in the hospitality sector as the country opens up to international visitors.