Research

SA Real Estate Market Performance Q3 2020

With the country moving to level one of its nationwide lockdown in response to Covid-19, local travel restrictions have been lifted, various retail trade sectors are now operational, and economic activity has increased. That said, South Africa’s finance, insurance and real estate sectors contracted by 28.9% in Q3 2020, according to our Q3 2020 report.

The trend in oversupply in office space continues and is anticipated to increasingly outstrip demand while driving increases in vacancies. Although market corrections have started taking place, the lockdown's full impact on the commercial office sector is likely to only show over the next 18 to 24 months.

While quality industrial stock remains the preferred real estate asset class of choice, rentals are anticipated to compress by at least 10-20% over the medium term, resulting in the sector starting to experience fundamental corrections similar to those in the commercial office sector. Landlords have started offering escalation free periods for the first year or two of occupation, in addition to increased tenant installation allowances, and rent-free incentives of up to six months.

The first relaxation of travel restrictions since the nation-wide lockdown in March 2020 resulted in South Africa's hospitality industry starting Q3 2020 on a positive note. Since mid-July, new daily cases trended down sharply and the impact of Covid-19 started to appear less severe than originally anticipated.

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