Market Analysis: The 2024 Return to Office Movement and Cape Town Commercial Vacancies
The return-to-office (RTO) movement has firmly embedded itself in South African corporate culture this year, reflecting global trends. As RTO becomes a mandatory component of HR compliance, companies are expanding their office footprints, and vacancy levels are starting to drop across the country—especially in coastal regions.
In this article, we examine recent market data and trends surrounding office rentals and explore how major property developers and investors are positioning Cape Town as an emerging financial powerhouse, with vacancy rates in the city now below pre-pandemic levels.
Vacancies decline as RTO becomes mandatory
The pandemic, with its mandatory lockdowns, had a profound suppressing effect on commercial property markets worldwide, and Cape Town was no exception. Beginning in mid-2020, businesses embraced flexible work arrangements, including work-from-home policies, causing vacancy rates to rise across the board.
In response, many businesses adopted hybrid work models, where employees worked remotely most of the time and came into the office only for occasional meetings. To reduce overheads, companies renegotiated rental contracts and downsized office spaces—a popular strategy during the economic slump brought on by COVID-19.
Fast forward four years, and the situation has made a remarkable turnaround.
Determining exactly how many employees have returned to the office and how frequently remains challenging, as company policies vary widely. However, a recent research report from Discovery Insurance offers several clues.
- The report, which analysed staff and management responses from companies across South Africa, found that the average worker is now back in the office at least three days a week.
- This conclusion was drawn from employee driving patterns, which showed an uptick in weekday commutes.
It’s important to note that this figure includes self-employed individuals and fully remote workers who may only drive to work one day a week or less.
Thus, the average of three days a week suggests a significant portion of respondents have returned to the office full-time, while hybrid employees spend at least three to four days a week at their desks.
Office vacancy rates drop in coastal cities
With many employees returning to the office for several days each week, as suggested by Discovery Insurance’s driving survey, it’s no surprise that office vacancy rates are improving nationwide.
Coastal cities like Umhlanga and Cape Town have particularly benefited from this trend, further bolstered by the semigration of professionals relocating from other regions. The correlation between RTO policies and declining office vacancies in these areas is clear.
Recent data from Growthpoint confirms a reduction in Cape Town’s office vacancy rate to just 5%—a significant improvement from the highs seen in 2020. This suggests that office vacancies in the Mother City have returned to below pre-pandemic levels.
A survey by SAPOA earlier this year revealed that Cape Town office vacancies were at roughly half the level of those in Gauteng, with Johannesburg’s vacancy rate of 14% almost three times higher than Cape Town’s 5%.
This dramatic difference tells a remarkable story of economic recovery and investor confidence in the Western Cape as Gauteng continues to reel from the pandemic’s economic fallout.
One plausible explanation for this positive trend in Cape Town is a shift in corporate policy.
In 2024, many large corporations transitioned from enticing employees back to the office to mandating RTO policies as a non-negotiable employment condition. With companies like Vodacom, Nedbank, and Arena Holdings requiring full-time office attendance, demand for larger office spaces has surged.
REIT results highlight a commercial property turnaround
The resurgence in office demand is also reflected in Real Estate Investment Trust (REIT) performance. Recent media reports indicate that REIT returns surged by 50% in 2024, driven by companies returning to the office and the recovery of commercial property balance sheets.
Geoff Jennett, CEO of Emira Property Fund, has been particularly optimistic about the current performance and future prospects of commercial spaces, especially in Cape Town.
In a recent statement, Jennett attributed the city’s superior office vacancy performance to the ongoing semigration trend. High-net-worth business owners and investors—many from Gauteng – have been relocating to the Western Cape, further fueling demand for Cape Town office rentals.
A promising outlook for Cape Town’s commercial property market
Looking ahead to 2025, the outlook for Cape Town’s commercial property sector is exceptionally positive. Mandated RTO policies from major corporations are reversing the lower demand seen during the pandemic. At the same time, continued semigration is likely to drive even greater interest in office spaces across the Cape Peninsula.
These RTO trends are supported by increased investment in the sector, as reflected by rising REIT returns and growing interest from both local and international property investors. Cape Town is viewed as offering excellent value at current valuations, particularly when compared to markets in the developed world.
As a result, Cape Town’s commercial property sector is well-positioned to attract significant attention from investors and dynamic corporate tenants over the next decade.
To secure a space in one of the city’s state-of-the-art office buildings, contact the Commercial Space team today.
