2025 has begun with marked volatility, shaped by sharp market fluctuations, shifting geopolitical landscapes, and persistent macroeconomic pressures, notes Standard Bank.
The South African real estate sector has not been insulated from these broader dynamics, according to Simon Fiford, senior VP, Real Estate Coverage at Standard Bank.
“Often misunderstood and seen as a monolith, the sector comprises multiple, highly differentiated asset classes: office, retail, residential, industrial and alternative real estate assets-including data centres, cold storage facilities, and student accommodation, among others.”
Across these categories, performance has varied, stated Fiford. As the largest African bank by assets Standard Bank said that despite macroeconomic challenges, the real estate sector has shown notable resilience.
Beyond global pressures, the real estate market contends with persistently high interest rates, the lingering effects of the post COVID-19 recovery, and muted domestic growth in South Africa. These factors have impacted each asset class differently.
Office
Office rentals have shown surprising resilience. The national weighted decentralised vacancy rates for grades A+, A and B office space decreased to 12.6% in Q4 2024, down from 14.4% in Q4 2023.
The shift back to physical workplaces has gathered momentum, as hybrid fatigue sets in, and companies prioritise in-person collaboration.
Globally, firms such as Amazon, IBM, JP Morgan Chase, Tesla, Zoom, and Google have implemented return-to-office mandates.
“Locally, we’ve observed a similar trend: more businesses are encouraging employees to return to office environments, driven by benefits like faster onboarding of new hires, enhanced collaboration, more effective strategic planning and execution,” said Fiford.
Retail
The real estate expert said that the retail sector has experienced a remarkable recovery. “Footfall and occupancy rates have now surpassed pre-pandemic levels in several key African markets.”
The asset class is also seeing low vacancy rates (5.5% FY 2024), as well as increased adoption of solar PV initiatives which are being used to manage operational costs, he said.
Standard Bank recently issued a renewable bond with the aim of providing access to affordable sustainable funding for such projects, which ultimately relieve pressure on electricity grids.
“Furthermore, we have witnessed the rise of urban consolidation which has led to innovative precinct developments, which blend residential, retail, and cultural spaces in one environment,” said Fiford.
Residential
He said that the structural undersupply of affordable housing in the country remains a challenge. Citing the Centre for Affordable Housing Finance in Africa, Fiford noted that 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, underscoring their centrality to household wealth.
“Importantly, government-subsidised housing (GSH) makes up 32% of total residential units, or about 2.18 million homes. This indicates massive potential for scalable investment and impact.” Fiford said that Standard Bank continues to support clients like Calgro M3 with sustainable finance solutions to support developments such as the Bankenveld District project in Sandton.
“Encouragingly, the residential market is showing lower vacancy rates, increased investment in build-to-rent and build-to-sell developments, and a steady rise in rental yields.”
Industrial
The standout performer across the board continues to be the industrial sector. This asset class benefits from booming e-commerce, the reshoring of supply chains, and demand for warehousing solutions.
Vacancy rates have dropped by 2.1%, while rental growth has exceeded 5% year-on-year.
“We are also seeing a surge in tenant-driven developments and sale-and-leaseback structures, enabling manufacturers to remain focused and unlock capital to invest in core operations,” said Fiford.
Alternative Assets
Data centres, cold storage, and student accommodation continue to emerge as strategic sub-sectors, said Fiford.
Their rise speaks to shifts in technology, food logistics, and urbanisation, pointing to new investment opportunities, he said.
Relevance of Physical Real Estate
According to Standard Bank’s internal estimates, the South African commercial real estate sector is currently valued at approximately R1.9 trillion.
This represents a significant increase from the R1.3 trillion recorded in 2015, highlighting the sectors growth over the past decade. If we add to this the estimated value of the residential property market (R6.9 trillion) the market size exceeds R8.8 trillion (as of end of 2024).
Standard Bank stressed that these valuations may not fully capture the entire market, as certain segments like government-owned properties, hospitals, hotels, and multi-dwelling residential units might be underrepresented in municipal data.
