South African commercial property has now posted four consecutive years of positive capital growth, with the sector delivering a total return of 12% in the 12 months to December 2025 — its strongest performance since 2018 — according to the MSCI South Africa Property Index, sponsored by Absa. The results, detailed in an analysis published via Engineering News by Mahir Hamdulay, Head of Financials Research at Absa CIB, point to a recovery that is no longer confined to a single asset class, but is now visible across retail, industrial and office property alike.
Broad-based recovery, not a single-sector rally
Income returns came in at 8.5% — above the ten-year average — while capital growth pushed property values back to levels last seen a decade ago. For the second year running, the South African index also delivered the highest total return in local-currency terms of any market in MSCI’s global property index universe, an unusual feat for an emerging-market property sector still working through the after-effects of load-shedding-era uncertainty and a prolonged high-interest-rate cycle.
What distinguishes the 2025 results from earlier stages of the recovery is breadth. Retail, industrial and office all posted gains, with each sector showing a distinct — and instructive — set of drivers.
Retail benefits from easing inflation and lower rates
Retail remains the dominant component of the MSCI index, representing 61% of its value, and delivered a total return of 12.7% in 2025, up from 12% the year before. Township and rural retail nodes outperformed the broader category, generating returns of 17% and 17.8% respectively — a signal that consumer spending recovery is not confined to established metro malls.
SAPOA’s 4Q25 Retail Trends Report recorded trading density growth of 3.9% year-on-year, roughly tracking inflation, alongside vacancy rates improving to 4.5% and gross rent-to-sales ratios holding stable at 6.8%. Both moderating inflation and lower interest rates have supported the improvement in consumer spending underpinning these numbers.
Industrial still the standout performer
Industrial property, at 11% of the MSCI index, once again produced the highest total return of any major property class at 13.4%. Capital growth moderated relative to 2024, but income returns held stable. Demand for logistics facilities and tenant-driven developments continued through 2025, with vacancies staying tight — a supply-demand imbalance that has kept rental growth intact even as capital growth cools from its earlier peak.
Office: the most significant shift in the cycle
Office property — long regarded as the sector facing the deepest structural headwinds — delivered a total return of 9.7% in 2025, up from 9.4% the year before, with both income returns and capital growth improving. Representing 18% of the index, the sector’s recovery is arguably the most notable development in this cycle given how far it has had to climb back.
According to SAPOA’s 4Q25 Office Vacancy Report, the national office vacancy rate declined from 15.8% in 2024 to 12.8% in 2025. But the recovery is uneven: coastal markets such as Cape Town and Umhlanga continue to outperform the Johannesburg metro, and modern, well-located precincts are attracting tenant demand that older stock in the same nodes is struggling to match. In practice, this means the office recovery is a “flight to quality” story more than a uniform market-wide rebound.
| Sector | Share of MSCI Index | 2025 Total Return | vs 2024 |
|---|---|---|---|
| Overall Index | 100% | 12.0% | Strongest since 2018 |
| Retail | 61% | 12.7% | Up from 12.0% |
| Industrial | 11% | 13.4% | Highest of all sectors; capital growth moderated |
| Office | 18% | 9.7% | Up from 9.4% |
Risks that remain on the table
The report is careful not to overstate the case. Ongoing geopolitical tensions are flagged as a source of inflationary pressure and uncertainty around the future path of interest rates, both locally and globally, with knock-on implications for tenants, landlords and capital providers. None of the improvement in fundamentals guarantees that every property asset will perform equally — differentiation between grades, nodes and cities is, if anything, becoming more pronounced rather than less. Figures cited here reflect realised historical index performance rather than forward-looking projections, and past returns are not a guarantee of future performance.
What This Means for African Property Investors
Four consecutive years of positive capital growth — and the broadest sector participation since before the pandemic — is a meaningful signal that South African commercial property has moved past its post-2020 low point. For investors, the key takeaway isn’t the headline 12% return itself, but where it’s coming from: industrial continues to reward exposure to logistics and well-let tenant-driven developments; retail’s improvement is being carried disproportionately by township and rural nodes rather than only prime metro malls; and office, while recovering, is bifurcating sharply between well-positioned coastal precincts and ageing Johannesburg stock. Investors weighing new allocations should treat asset quality and location as the dominant variables in this cycle, not sector labels alone — and should stress-test any positive momentum against the inflation and interest-rate risk the report itself flags as unresolved.
Sources
Mahir Hamdulay, Absa CIB, via Engineering News (30 June 2026)
MSCI South Africa Property Index, Annual Results 2025 (sponsored by Absa)
South African Property Owners Association (SAPOA), 4Q25 Retail Trends Report
South African Property Owners Association (SAPOA), 4Q25 Office Vacancy Report
Related Articles
Research assisted by AI. All sources verified by the editorial team.
© 2026 propertynews.africa
