News release

South Africa’s Real Estate Market – Q1 2020

JLL releases Q1 South Africa Real Estate Market Performance report

May 12, 2020

South Africa, 12 May 2020 – JLL, one of the world’s leading real estate investment and advisory firms, today released its Q1 South Africa Real Estate Market Performance report which outlines the implications that Covid-19 will have on major sectors across the country.

According to the report, most real estate sectors across the market have softened with the exception of the industrial sector, which has recorded a strong performance in Q1 2020.

As travel restrictions, the closing of non-essential businesses, and mass cancelations of events has significantly slowed economic activity in South Africa, traditional retail, heavy industry and the hospitality sector have been hit the hardest.

The International Monetary Fund (IMF) anticipates the effects of Covid-19 will force the global economy to contract by 3% in 2020, whilst emerging markets are expected to contract by 1%. Emerging economies are anticipated to bounce back stronger than leading economies, with GDP predicted to grow between 4% and 6% in 2021. Although Covid-19 will have significant impacts on the global economy over the short to medium term, long-term structural shifts may be less severe.

“Whilst some of the more resilient leading economies have been able to stabilize amidst the global pandemic, many emerging markets have been adversely impacted by compromised global supply chains and South Africa is no exception,” said Micheal Scott, Research Analyst, JLL, Sub-Saharan. “With slowed economic growth and rising debt obligations, South Africa’s debt to Gross Domestic Product (GDP) ratio is expected to reach 70% by the end of the year, so the implications on local businesses is significant. Many are going to be forced to scale down and reduce spending.”

The Industrial sector space remains strong, with year-on-year capital growth backed by low vacancy rates (3.4% national average). There is now a growing demand for warehouse and distribution space due to the significant growth in online retail sales from a relatively low base. E-commerce is expected to strengthen as consumer preference and behaviors change, with increased market penetration as a result of more accessible and affordable technologies.

South Africa has seen a dampened office sector in Q1 2020 with the rise of a contracting economy coupled with rising unemployment rates while national vacancy rates are hovering around the 10% to 11% mark. Rising operational costs, improved networking capabilities, and the global outbreak of Covid-19, has seen a strong shift in focus for corporates to scale down on office space and promote satellite working establishments.

This sector will start seeing a shift from traditional office space towards flexi spaces, as businesses realise the efficiency (ease of business) and affordability benefits of co-working spaces. These trends will inevitably reduce the demand for office space in the medium to long term, driving vacancies and constraining new traditional office space development.

The hospitality industry has been one of the hardest hit markets as global travel bans, social distancing and the subsequent postponement and cancellation of events has left a void throughout the industry. Consequently, multiple hotel groups have been forced to close across South Africa. In the short to medium term, staycations will be key, whilst more focus will need to be placed on delivering niche, functional hotels.

Retail sales growth is expected to decline, as consumers continue to feel the effects of rising unemployment, reduced disposable household income levels, rising inflation and a depreciating currency. E-commerce growth in South Africa will contribute to the reduced demand for traditional “super regional malls”, whilst community and neighborhood convenience centers, as well as user experience-driven facilities will become increasingly popular.

Read the full report here: https://www.jll.co.za/en/trends-and-insights/research/south-africas-real-estate-market-performance-q1-2020.


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes 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 $18.0 billion, operations in over 80 countries and a global workforce of more than 93,000 as of December 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.

About JLL MEA

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 900 internationally qualified professionals across its offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo,

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