From Industrial to Office – the State of SA’s Real Estate
The Cape Town commercial property market has made good strides in the first half of 2025.
From strength in the industrial sector that continues to underpin growth, to the office and retail segments that continue to stabilise after several years of disruption, the market is upbeat as we pass the mid-year mark.
A combination of excellent service delivery in the Western Cape, stable interest rates, and gradual infrastructure upgrades is also boosting business confidence at a time when the country is bracing for the impact of US tariffs.
This midyear update unpacks the current performance of office, industrial, and retail property, along with key investment trends and the outlook for the rest of the year.
2025 Economic Overview: Steady and Stable
Cape Town remains one of South Africa’s most resilient commercial hubs, with higher than average household incomes and better-managed municipal services.
These unique advantages have helped the region to remain attractive despite mounting national economic pressures.
- According to the latest industry data, business confidence has seen a modest improvement in the Western Cape.
- Energy supply remains in question due to Eskom but is no longer at crisis levels in Cape Town thanks to widespread solar adoption.
- Interest rates have held steady, providing a degree of predictability for landlords and tenants alike.
Thanks to these stabilising factors, overall business and investment sentiment in the Mother City is more positive than it was a year ago, particularly in key business districts and logistics corridors.
This is excellent news for the Cape Town commercial and office space sector.
Office Property Still In Demand
The office market has remained strong, with high occupancy rates and stable demand.
According to Knight Frank’s Africa Office Market Dashboard, Cape Town office rental and occupancy has risen above 80 percent in key commercial nodes. These are among the highest levels recorded since before the pandemic.
- Nodes like Century City, Claremont, and Bellville have also shown improvement, particularly where properties are newer or have been repositioned.
- Prime space remains relatively well-occupied and can still command decent rental levels.
- Older buildings in less central locations continue to be earmarked for refurbishment or repurposing, giving tenants hope that supply will continue to increase in the coming years.
While some companies in the Cape have returned to the office full-time, hybrid work remains common, and it is affecting space requirements.
Some tenants are downsizing or looking for more flexible terms, and landlords are adapting by offering incentives or converting space into mixed-use formats.
Retail Sector on the Rise
Retail property has seen a modest recovery this year, especially in areas that benefit from tourism and buildings that enable hybrid work.
- High-traffic destinations like the V&A Waterfront and other lifestyle centres have attracted renewed interest, while suburban retail has held up well as people spend more time working from home.
- Media reports note that consumer activity in prime retail zones across Africa has increased, with Cape Town being a standout among Southern African cities.
- The return of both domestic and international visitors has helped retail turnover, but consumer confidence remains fragile.
- Many tenants are still cautious, with small and independent retailers preferring short-term leases or shared spaces to minimise risk.
Developers are responding to these conditions with more flexible designs and a focus on mixed-use precincts that blend residential, commercial, and leisure elements.
New developments continue to come to market in the city’s suburbs, meeting long-term demand remains with modern retail stores that are conveniently located near popular residential areas.
Industrial Property Continues to Shine
Industrial remains the strongest performing segment in Cape Town’s commercial property landscape.
Statista data shows sustained growth in rental rates for warehousing and logistics properties in the Western Cape, supported by tight supply.
- Demand continues to outstrip availability in well-located areas like Paarden Eiland, Epping, and Airport Industria.
- Rents have increased noticeably over the past year, and vacancy rates remain extremely low.
- Even smaller properties are leasing quickly, particularly those that support logistics, warehousing, and light manufacturing.
- The growth of e-commerce and the need for last-mile delivery have driven much of the demand for industrial property in the Cape Peninsula.
At the same time, many tenants are choosing to buy rather than lease, given the current interest rate environment and the long-term savings ownership can offer.
Sustainability is also coming into focus, with a growing number of industrial users seeking solar-ready or energy-efficient facilities.
Although new stock is limited, developers are starting to look at brownfield conversions and other creative ways to increase capacity.
Increased Investment Activity in Sustainable Cape Town
Investor sentiment in SA is gradually improving this year, especially in and around Cape Town.
There has been a notable uptick in investor interest across several African cities, with Cape Town outperforming much of the region in both yield stability and demand.
- Local property stocks have rebounded significantly since 2024, and real estate investment trusts have seen renewed inflows.
- Larger players are investing heavily in upgrades and mixed-use expansions, with major precincts like the V&A Waterfront continuing to attract capital.
- While new developments remain popular, refurbishments and conversions are gaining traction too.
Industry insiders are noting that offshore interest is also picking up, with investors from Europe and the United States showing a preference for stable, well-managed assets in Cape Town over other cities.
Foreign buyers are particularly active in the premium office and hospitality segments, often looking to acquire income-generating properties outright.
The Western Cape’s reputation for better governance and lower risk continues to give it an edge over other metros.
Rising to Remaining Challenges
Despite the improving outlook, several challenges remain in the Cape Town commercial property market.
- Load-shedding is still a concern, and while mitigation strategies have become more widespread, they are an added cost for owners and tenants.
- Rising municipal rates and increased compliance requirements are also putting pressure on net returns.
- Logistical challenges and policy uncertainty continue to affect national investor sentiment, even if Cape Town is relatively insulated from these problems.
While no city or property market is 100% perfect, the City of Cape Town stands out for its willingness and effectiveness in dealing with the challenges facing the city.
- The city’s ambitious vision for 2050 could see alternative energy sources and universally accessible public transportation become the norm.
- A dialogue with property owners over rates is ongoing, and the risk of load shedding is expected to decline further over the next few years as the city approaches energy independence.
With a strong local economy, excellent infrastructure, and a bright business future, now could be the ideal time to base your business in Cape Town.
Chart Your Path to Cape Town With Us
Cape Town’s commercial property market enters the second half of 2025 in a stronger position than it has been in several years.
The industrial sector continues to drive growth, and the office market is slowly stabilising. Retail is recovering in the right locations, supported by flexible leasing strategies and lifestyle-oriented planning.
If you’re ready to share in Cape Town’s big success story, we’re ready to match your business with the ideal commercial space. Contact our team of area specialists to get started.
