Global real estate investment set to rise
On the back of improving sentiment, global real estate investment is projected by Savills World Research to rise by 7% to US$747 billion in 2024, with further growth to US$952 billion forecast for 2025, says Andrew Dewey, MD of Swindon Property, which is Savills’ commercial associate in sub-Sarahan Africa.
Says Dewey: “According to Savills, this recovery is anticipated to gather momentum in 2025, and by 2026, global activity is expected to surpass the US$1 trillion mark for the first time since 2022. Central banks across major economies have begun to cut policy rates, fears of a global recession have largely been quelled and occupational markets remain resilient. The fundamentals of real estate continue to attract institutional investors, who have increased their market share to the highest level since 2021.”
Savills reports that much of this initial growth is supported by a recovery in Europe. With all major central banks in the region having started rate-cutting cycles in the summer, commercial real estate is looking a lot more attractive.
Says Dewey: “A key trend noted by Savills is that commercial real estate is advancing, with more intelligent buildings that enhance working environments and drive net-zero initiatives. Furthermore, tenant experience and satisfaction have become increasingly important in the fight for talent and the drive to encourage employees back to the office.
“In addition, the prevalence of hybrid working has heightened this need as office attendance has shifted towards ‘peak days’, a trend which requires smart management of spaces and facilities. In Europe, office attendance is highest on Tuesdays – reaching 68% occupancy – and lowest on Fridays, at 43%, according to Savills’ figures, with a similar pattern observed in the US. While no such data is available for South Africa, we have seen that the ‘return to office’ drive has helped cut vacancy levels in the office sector.”
Dewey says in terms of trends the industrial market still outperforms both retail and office space due to higher demand in both letting and buying. According to Rode, the industrial property market continues to shine, with nominal rental growth accelerating further in Q3 2024, amid continued low vacancy rates of 3.6%, lower than the long-term average of 4.2%.
“Generally speaking, across the commercial property markets, while the two recent interest rate cuts of a cumulative 50bps have had a positive impact, showing optimism of a downward cycle, the balancing act between the current high cost of debt and return on investment is still making it hard for buyers’ gearing. The level of distressed sales has therefore increased in 2024, which has been seen specifically in the auction sector.
“Regionally, while Cape Town continues to outperform Johannesburg and KwaZulu-Natal, Johannesburg remains the GDP capital with the majority of our larger transactions still taking place in this province.”
Also according to the latest Rode Report, SA’s office market recovery continued in Q3, with Cape Town at the forefront with strong demand in many nodes, such as the V&A Waterfront and Century City. The Mother City’s Q3 rental level was 16% higher than pre-Covid levels. Durban performed second best so far in 2024, driven by the La Lucia/uMhlanga node, while recovery in Gauteng has been slower.
Says Dewey: “Positively, Rode notes that recovering business confidence and a low level of new office construction activity augurs well for the office sector’s prospects nationally, particularly in light of the GNU, consistent power supply and declining interest rates. Rode cites the reason for the low building activity as high vacancies due to the work-from-home trend, over-building in the decade before the pandemic, and slow economic growth.”
For further information contact Swindon Property on +27 (21) 422 0778.