Commercial Property Trends 3rd Quarter 2020

Much has been said about the long-lasting impact of COVID-19 on the commercial property market but is it a case of ‘much ado about nothing’ or are the concerns evidence-based and valid?

In this article, we will unpack some of the challenges and opportunities facing the commercial property industry in South Africa and introduce key thoughts in the form of questions to consider for your organisation:

  • Associate Professor Francois Viruly, Head of the Urban Real Estate Research Unit at the University of Cape Town posits that the trends currently impacting the market are not specifically COVID-19 related, but rather trends that have been influencing the property market for many yearsi.

Viruly predicts a return to the home as the primary place of economic activity. He anticipates that due to evolving globalisation and advancements in technology, Central Business Districts will be replaced by Global Business Districts and that commercial property will slowly be converted to residential real estatei.

David Sienker, CEO of The Business Exchange shares this view saying that businesses are realising that they don’t need large centralised offices but can function effectively with most employees working remotely and some teams working from flexible lease offices at a fraction of the costii.

Both Sienker and Viruly predict that co-working spaces will gain popularity as businesses adopt a hotel-like approach – with the letting of space reflecting the provision of a service.

Viruly presents a challenge to the market to stay on top of technological advancements in the property industry, with our ability to adapt at the speed of advancement as a key predictor of successi.  

Key thought: What is the likely impact of the growth in co-working on commercial real estate? Where do the opportunities lie?

  • Organisations looking to free up cash flow are increasingly turning to sale and leaseback transactions as a viable solution. A ‘sale and leaseback’ is a transaction where an investor purchases a property that is currently owned and occupied by a business. A lease is drawn up at the same time as the sale, enabling the business to remain in the building. In this way the new owner is guaranteed to have a long-term tenant and there is minimal disruption to the business’ operationsiii.

Justin Thom, associate director of Galetti Corporate Real Estate notes that there is a rise in these types of transactions where companies are making decisions in the short term to free up cash flow. Thom recommends that if such a transaction is considered, proper due diligence should be conducted and sellers should consider including rent review clauses or breaks in the agreement to prevent annual escalations resulting in higher than market rental amounts later on in the lease termiii.

Key thought: How can commercial brokers position themselves to assist with these types of transactions? Or help to negotiate more favourable, flexible lease terms on behalf of their clients?

  • CEO of Growthpoint Properties, Estienne de Klerk notes that rates and taxes have increased so substantially that the situation is unsustainable for the real estate industry. He also mentions that the threat of land expropriation, and the introduction of legislation in this regard will have a negative effect on investment in the countryiv.

He indicates that although COVID-19 has sparked the global adoption of work-from-home arrangements, requirements to reduce space will be offset by the need for social distancing. De Klerk believes that the lack of IT infrastructure in residences and due to the type of work being completed, offices will still very much be a part of the post-pandemic landscape in the countryiv.

Key thought: If you are in the commercial property industry, how has the social distancing requirement impacted your client’s real estate needs?

  • Restrictions in movement due to the lockdown have created opportunities for businesses like GoIndustry DoveBid, with headquarters in the USA, to offer unique online sales solutions for corporate clients in South Africa. GoIndustry have successfully conducted numerous online auctions – including the sale of underutilised and redundant property for telecommunications giant Telkom – during the lockdown and have over 750 registered bidders from across the globev.

Online auctions and remote purchases are becoming more and more popular in South Africa, another example of how the property industry is being impacted by globalisation and advancements in ‘proptech’.

Key thought: What can you do as a firm to stay on top of the latest advancements in proptech?

  • The results to the FNB Property Broker Survey for the 3rd quarter of 2020 show an oversupply of commercial property in all six major metros in South Africa. This has placed downward pressure on rentals that could translate to a decline in average property values by a projected 7%vi.

The industrial market appears to be the strongest of the three commercial property sectors – industrial, retail and office.

Key thought: What has your observation of market activity in the commercial sector been? How can your firm take advantage of the movement shown in the industrial sector?

We hope this summary sparks food for thought as you navigate the new normal.


i           Biz Community (2020). Post Covid-19: How the property market will potentially evolve. Retrieved from

ii          SA Property Insider (2020). The fast-changing face of South Africa’s traditional CBDs. Retrieved from

iii         Biz Community (2020). Rise in sale and leaseback transactions to free up cash flow. Retrieved from

iv         Smith, C. (2020). Growthpoint CEO: Rising rates the biggest threat to commercial property. Retrieved from

v          Bilbulia, T. (2020). FNB survey shows decline in all three commercial property markets. Retrieved from

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