Changing office market creates a tenant-friendly landscape

According to the latest figures from the South African Property Owners Association (SAPOA), the national office vacancy rate reached 13.6% in Q1 2025. This data, drawn from a robust survey covering 2,773 completed office buildings and eight developments across 54 nodes, reflects an industry in transition.

As structural shifts in demand continue to reshape the office landscape, these changes are paving the way for innovative uses of space and more tenant-friendly leasing opportunities.

While the market has seen a small overall increase, the market is demonstrating segmentation by grade and geography. P-Grade office spaces—top-tier properties in premium locations—posted a markedly lower vacancy rate of 6.8%, while B-Grade offices continue to bear the brunt with 16.8% vacancy. Notably, Cape Town outperformed all other regions with the lowest vacancy rate at 6.4%, a reflection of its consistent desirability and resilient demand for high-quality commercial space.

Craig Brown, commercial property sales associate at RE/MAX One and a SAPOA vacancy committee member, provides key insights into these trends. “Rental increases have trailed inflation over the last five years,” Brown explains, “creating a unique window for tenants to upgrade their offices – often at a reduced net cost.”

Brown notes that while the COVID-19 pandemic catalysed a contraction in office footprints, it also accelerated a strategic migration towards higher quality, well-located office spaces. “This has bolstered the performance of premium A-Grade and P-Grade properties in key locations,” he adds.

The market has become increasingly tenant-friendly, with landlords offering attractive incentives to secure occupants. These include rental incentives for up to a year, as well as covering expenses for fit-outs, moving, furniture, and even rent-free periods. “This is a departure from traditional practices, where tenant installation allowances were tightly ring-fenced for construction only,” Brown observes.

For investors, these dynamics highlight both caution and opportunity. The polarisation of vacancy rates between property grades indicates that older and poorly located assets may struggle to attract tenants. Conversely, well-positioned prime properties continue to hold value and may see enhanced returns as tenants consolidate into better quality spaces.

According to Brown, the current lower interest rate environment is also creating a more favourable landscape. “With borrowing costs reduced, we’re seeing renewed interest in purchasing office space, particularly among owner occupier and investors looking to lock in attractive financing terms,” he states.

In summary, South Africa’s commercial property market is undergoing a subtle but significant transformation. “Astute tenants are capitalizing on current market conditions to secure better spaces, either through leasing or purchasing arrangements,” says Brown. “Long-term leases paired with attractive incentives often create mutually beneficial outcomes for both landlords and tenants.”

Issued by: Kayla Ferguson