SA PROPERTY MARKET BEARS THE BRUNT OF COVID-19

but some sub-sectors fared better than others

- MIEKE PURNELL and PEPLER SANDRI

THE SOUTH African property market struggled through the COVID-19 pandemic, with virtually all sectors registering a decline in performance, according to the South African Real Estate Investment Review and Outlook 2021/22 report, which reviews commercial property investment activity in South Africa.

Primary sources of information include publicly available databases and resources and interviews with industry stakeholders, while 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.

Office sector under pressure

According to the report, investment in office property has continued to decline 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 ack 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).