SA’s commercial property market is conservatively valued at R1.92 trillion, almost 48% higher than the last official estimate in 2015 and making it the largest commercial property industry in Africa, according to real estate software and data services provider, Gmaven.
“Property value feeds directly into a variety of crucial metrics from unemployment figures to taxes, rates, and utility usage – even insurance premiums. Understanding the real value of the country’s commercial real estate sector influences rent payments, operational costs, and the future of infrastructure development,” says Will Harris, CEO of Gmaven.
Consider this: SA listed property owners hold R400 billion in property with the bulk of the value residing with owner-occupiers, private owners, pension and life funds.
Up until now, experts in the sector have only been able to guestimate its true value with the last comprehensive study in 2015 when the economy was in a different place. Then, GDP growth was 1.3% with interest rates 2.25% lower. Today, the landscape has changed significantly and despite the pandemic, weakened economy, and increased costs, the commercial property market continues to grow.
Here’s the breakdown of the value of commercial real estate across SA’s provinces, showing how commercial property value compares to population size:
The high-density metros of Gauteng and the Western Cape dominate the value share with hidden opportunities in regions like Mpumalanga and Limpopo where property values per capita are much lower and reflect a less formally urbanised population. This explains the growth of retail in these previously under-serviced areas.
The source of the R1.92 trillion figure comes from an unexpected but reliable place; the annual financial statements of the 213 SA municipalities which rely heavily on property rates and taxes and in turn, highly incentivised to ensure property values are accurate. At the same time, property owners are equally motivated to keep these values in check, as inflated values lead to higher tax bills. This balance creates a natural accuracy in the data which covers the entirety of the country’s commercial property landscape.
“While the value is a total number, it is based on the sum of specific, individual properties,” says Harris. “While this data is thorough, it is important to note that the R1.92 trillion figure is conservative. It excludes state and municipal-owned commercial property assets, as well as hospitals, hotels, schools, and multi-dwelling residential properties (in mature economies the latter is considered part of the commercial real estate market). Further, despite the natural accuracy or positive tension detailed above, municipal property values are generally below market.”
Interestingly, the value of commercial property can fluctuate significantly without a single new building being constructed. This is mainly due to property-specific factors and economic/market factors.
“Beyond the headline figure, it’s crucial to analyse commercial property by grade, category (e.g., office, industrial, retail), and size / GLA. These are harder numbers to come by than the SA commercial property value, but they represent the next frontier of insight for South Africa’s commercial property market,” he concludes.
