Despite the volatility, commercial property is holding its ground-and may in fact be turning heads for the right reasons.
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The local political uncertainty and mounting global trade pressure are proving testing to the commercial real estate sector in South Africa.
The rand approached a historic low of R19.93 against the US dollar on April 9, before recovering to R18.97 by April 14. Simultaneously, the JSE All Share Index experienced significant volatility, dropping from 89,950.79 on March 31 to 82,485.81 on April 9, before rebounding to 88,162.30 by April 14.
The catalyst? A 31% reciprocal trade tariff from the United States (effective April 9) has sent shockwaves across emerging markets. It was a sharp departure from South Africa's average 7.6% tariff and effectively sidelines the benefits previously granted to Sub-Saharan African economies under AGOA.
For Lesotho, where the textile and manufacturing sector makes up nearly 15% of GDP, a new 50% tariff could be devastating.
That said, John Jack, CEO of Galetti Corporate Real Estate believes that it is not all doom and gloom.
“South Africa kicked off 2025 on a high note, driven by lower interest rates, a stronger rand, reduced loadshedding and a boost in investor confidence.
“By mid-January, we saw solid traction, especially in the resources sector, which bolstered activity on the FTSE/JSE All Share Index. Fast-forward to now, and we're seeing capital flow back into safe havens as risk-off behaviour takes hold," Jack said.
As the year progressed, however, that momentum was tested.
Despite the volatility, commercial property is holding its ground-and may in fact be turning heads for the right reasons.
Jack noted that the local CRE market came back strong in late 2024.
"Vacancies dropped, net operating income improved, and there was a clear uptick in investor appetite. This was helped along by rate cuts, easing inflation, more consistent energy supply, and the formation of the GNU."
While global trade tensions will certainly disrupt some economic channels, Jack believes they also open the door for commercial real estate to shine: "In periods like this, the smart money tends to chase yield and stability- and that's exactly what the right property assets offer.
"They're long-term, income-generating and tend to outperform when the broader market feels uncertain."
He adds that not everyone is pulling their capital offshore. “Many investors are simply re-evaluating that creates opportunity."
South Africa's real estate market continues to offer compelling yields-particularly in sectors with tight fundamentals. With bricks-and-mortar assets offering both predictability and protection, CRE is increasingly being seen as a strategic hedge.
In a market like this, discipline matters. Jack advises investors and developers to keep an eye on macro indicators, diversify portfolios, utilise fixed-rate debt, and focus on demand-driven nodes to stay ahead. He also suggests considering regional markets and maintaining flexibility with leasing.
"South Africa's CRE market has been through its fair share of storms. It's proven itself resilient, especially in the face of structural constraints.
"Yes, short-term volatility might slow down certain deals or make tenants a bit more cautious, but the fundamentals are still there-particularly in logistics, repurposed office space, and tourism-driven assets,” Jack said.
According to the MSCI South Africa Annual Property Index, South African real estate posted the best return since 2015.
The index released earlier this month reveals an annual 11.5% ungeared total return to December 2024 for direct real estate. It tracked the performance of 1,733 property investments, with a total capital value of R 387.7 billion as at December 2024.
The total return for South African investment property in the year ending December 31, 2024, was 11.5%, consisting of an 8.4% income return and a positive capital growth of 3.0%.
This was the highest annual total return since 2015 and led the way among real estate markets globally that have released results for the 2024 calendar year.
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