Two opposing schools of thought create flux in SA’s commercial property industry
March 1, 2019

As South Africa emerges from last year’s recession, two schools of thought are expected to drive the commercial property market in 2019 and, as expected in an election year, political considerations are prominent, says our CEO John Jack.

The first school is betting on a positive election outcome. They expect a clear ANC victory to enable president elect Cyril Ramaphosa to navigate a tricky policy environment and attract foreign investment to South Africa, which is expected to buoy property prices by late 2019. These investors are taking advantage of softer property prices to add to their portfolios in the run up to the election.

A coalition government could see a significant loss in property value as the threat of an uncoordinated expropriation without compensation policy becomes more likely. However, if Ramaphosa sees good support for the ruling party it could attract investment and property values could rise on the prospect of better growth.

The second school is driven predominantly by fears that any potential post electoral property boom is unlikely to overcome concerns around rising interest rates and increased property vacancies which are driven by a low economic growth environment. These investors expect commercial property yields to continue to soften well into 2019, and are using the pre-election period to lock in some of the incredible gains achieved in the past decade (particularly in the direct investment commercial property category) by selling down their respective portfolios. We have seen yields softening over the last 18 months and believe this reflects certain sellers willing to accept less and hedge their investments elsewhere, be in it other sectors or offshore. This means that for these looking to buy, there are bargains to be had, especially during the first part of the year. It also means properties are likely to spend longer on the market.

Our data shows that Gauteng is experiencing the most transactions, followed by the Western Cape.

Despite these opposing outlooks for 2019, what we know for sure is that the upcoming election is unlikely to put the commercial and industrial investment market into a freeze. Instead, I believe the election will generate additional churn – with the fluidity of transactions possibly exceeding any other year. Our National Portfolio Sales and Investment team have noticed a definite pick up in the number of transactions coming to market as these opposing schools of thought follow their respective investment strategies up to the election.

The South African Reserve Bank is tipped to approve another interest rate hike later in the year. This will negatively impact yield given the more expensive debt which will see sellers accepting lower prices for their properties.

Our democracy is entering its 25th year and the real estate investment market has proved to be an asset class which has produced results year-on-year, and while the listed sector might be facing challenges, the direct investment market has shown to be a rock solid asset class both for investment buyers as well as owner occupiers.

Whatever the election outcome, 2019 promises to be an action packed year for the commercial real estate industry.

Galetti Corporate Real Estate acts as real estate representative of some of South Africa’s largest corporations and has been at the forefront of many of the countries larger real estate transactions. Visit for more information.