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4th Sep 2022

Architect Africa Online

Africa's Leading Architecture Aggregator

SA property sector market bears brunt of Covid-19

The South African property sector market struggled through the COVID-19 pandemic, with virtually all sectors registering a decline in performance. This is according to a new report published by JLL, a leading professional services firm that specialises in real estate and investment management. The report—South African Real Estate Investment Review and Outlook 2021/22—reviews commercial property investment activity in South Africa. Primary sources of information include publicly available databases and resources and interviews with industry stakeholders. Reporting is focused on deal flow registered in the 2021 calendar year and compares investment volumes in 2021 to deal flow over the previous four years.

“Deal flow value across the office and industrial declined compared to 2020, with reprieve in 2021 attributed to the retail and alternative and living property sectors. Student accommodation and filling stations emerged as a growing asset class in 2021, and demand remained rife for prime logistics and retail assets”, said Mieke Purnell, Research Manager, JLL.

According to the report, investment in office property has continued to declined since 2018 as the local economy weakened and the sector battled an oversupply scenario. Despite the major drop-off that occurred in 2020, the office sector remained under pressure in 2021 as several of the adverse drivers from the previous year remained prevalent. The investment appeal of this sector was especially limited by weakened rentals, high vacancy rates, and a slump in demand during the pandemic, with limited scope for improvement. This sector’s aggregate investment value reached roughly R2.6 billion in 2021, down by 18% from the R3.1 billion reported in 2020.

Major office deals in 2021 were generally sale and lease-back transactions linked to large corporates, such as the Telesure Campus transaction in Dainfern, or associated with redevelopment and refurbishment, such as the disposal and acquisition of 1 Thibault Square. According to Pepler Sandri, Director: Capital Markets, JLL, average sales rate data reflects a bifurcation in the market, with prime stock achieving relatively favourable rates. In contrast, lower grade stock in weaker nodes realised significantly lower prices, particularly in comparison to replacement cost.

Like other sectors, the retail property sector suffered under the initial lockdown restrictions but proved resilient in 2021. The staggered nature of lease expiry profiles at shopping centres, together with negative rental reversions, lower escalation rates, and shorter lease terms (none of which were unique to the retail sector), continue to hamper the performance of the sector, which is seen to be underperforming. The aggregate transactional value within the retail sector rose by ±17.6% in 2021, effectively exceeding values reported over the historical five-year period. Transaction counts declined, but the aggregate lettable area transacted also improved through 2021. Retail transactions are estimated to account for around 34% of total deal flow activity, remaining level in terms of investment values reported for 2020.This is according to Sandri, who continues that income performance of retail property is on the rise as vacancies are filled, and landlords seek alternative revenue streams through the installation of signage or solar PV systems, for example. Regardless of the headwinds faced, investment into the retail sector showed strong growth in 2021, increasing by 18% to peak at just over R7.0 billion.

The retail sector saw several landmark deals in 2021, including the finalisation of the sale of Atterbury Value Mart for over R1 billion, and the Nicolway Shopping Centre transactions at a record yield,breaching R1 billion as well. Looking ahead, JLL is involved in and aware of several significant shopping centre transactions currently being negotiated, although it remains to be seen whether investment in 2022 will reach R7 billion or higher.

Following the outlier transaction volume experienced by the  industrial property sector in 2020, investment volumes dropped significantly in 2021. When comparing investment in 2021 to before the pandemic, it is evident that demand fundamentals remain strong. As a case in point, JLL advised on the recent sale of the 145,000 sqm DSV Campus in Plumbago that transacted for R2.05 billion in 2021, accounting for almost half of all deal flow within the sector for the year. Further investment into industrial property is presently limited by the lack of corestock available, rather than a lack of demand.

The alternatives and living sectors recorded a record year. This sector was dominated by student accommodation, senior housing, and mid-market rental accommodation. Data centres were added to the pool of non-traditional property investment in 2020, and in 2021 filling stations emerged as with strong investment volume. The outstanding performance of the alternative and living sector is primarily the result of two of the largest student accommodation portfolios changing hands, and unless a similar extraordinary deal is finalised this year, investment volume will likely not reach the record R6.6 billion achieved last year.

Of all property sectors, hotels and hospitality properties possibly bore the heaviest brunt of the pandemic. Harsh operating conditions resulting in lower capital values created an opportunity for investors with a longer-term outlook to purchase hotels at well below replacement cost. Additionally, the pandemic-induced slump in hotel development activity (as well as offices and retail centres) should help with recovery as the stock situation is rectified. Investment into the hospitality sector in 2021 was not only limited to direct property sales, but rather included the restructuring of operational and letting agreements as well. A significant hotel sale recorded in 2021 is the Zimbali Resort in KwaZulu Natal.

“Despite the adverse effects occasioned by the COVID-19 pandemic, investment activity is supported by debt capital becoming more affordable than ever through the lowering of lending rates. Along with discounted asset prices, this has led to an ideal investment climate for investors who predict a medium to long term recovery”, added Purnell.

The report concludes that annual economic growth trends are forecast to stabilise (drop) to pre-pandemic levels as extraordinary stimulus winds down. Interest rates locally and globally are increasing; however, the expectation remains that lending rates will linger below levels seen before the global financial crisis.

Looking forward, Sandri suggests that “the green shoots of growing investor appetite are emerging, and 2022 is set to be a strong year from a commercial property investment sales perspective, with several preeminent deals already underway.”


JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion in 2021, operations in over 80 countries and a global workforce more than 98,000 as of December 31, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit


Across the Middle East and Africa (MEA) JLL is a leading player in the real estate and hospitality services markets. The firm has worked in 35 countries across the region and employs over 1400 internationally qualified professionals across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo, Casablanca, Johannesburg, and Nairobi.

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