Buy-to-let investors from around the world are snapping up rental apartments in South Africa as companies ramp up their demand for office space and large numbers of tenants make their way back to the major cities.
That's the word from Rory O'Hagan, principal of Chas Everitt Sandton & Hyde Park, who notes that rising office demand, especially in Johannesburg and Cape Town, is being accompanied by a spike in demand for rental apartments and estate homes close to workplaces in the main commercial nodes. This is being further fuelled by the evolution of many office buildings and precincts into mixed-use environments to make them more attractive as permanent residential options.
"Rental demand is soaring in areas like Sandton, Rosebank, Bryanston and Waterfall in Johannesburg, for example, to the extent that we often don't even have time to advertise homes in these areas before they are taken up.
"In a turnaround from the Covid-driven trend which saw city centres empty out as remote working freed both employees and executives to head en masse for coastal and country locations, these tenants and buyers are now returning to urban areas in droves - and bringing many others with them in search of new jobs and business opportunities.
"And this new dynamic has not been lost on investors, both local and foreign, who are literally queuing up to buy apartments, townhouses and clusters suitable for letting in the most sought-after areas. We are getting up to 30 visitors to such homes on show days, and competing offers on many of them, and we see also many new developments in both Johannesburg and Cape Town experiencing rapid sellouts, mostly to investors from Europe and other countries in Africa as well as South Africa."
The main reasons for the current increases in office demand, he says, are the increasing number of large employers (especially in Johannesburg) requiring a full return to the office and the growth of the labour-intensive Business Process Outsourcing (BPO) industry in SA.
"These factors are noted in the latest office market reports from global commercial real estate company Jones Lang LaSalle (JLL), which reveal that more than 400 000sqm of office space was absorbed during the first quarter of this year, mostly in Johannesburg (230 000sqm) and Cape Town (140 000sqm), and that while the national vacancy rate hovers at around 14%, the vacancy rate for prime (P-grade) office space is now only 6%.
Read more: South Africa Office Market Dynamics, Q1 2025 and Johannesburg Office Market Dynamics, Q4 2024
"At the same time, a rising number of multinational companies have recently made strategic investments in SA, especially in Cape Town, and others are responding now to the government's new frameworks for public-private partnerships, especially in infrastructure development.
"Owing to its increased international exposure because of the African Continent Free Trade Agreement and the forthcoming G20 Summit, Johannesburg is the current focus of these companies, and this will no doubt create further rental demand for both offices and residences for staff and executives assigned to work on SA projects."
Meanwhile, says O'Hagan, the most recent StatsSA Household Survey shows that the overall percentage of SA's 16,5m households that rent rather than buy has increased from 17,7% in 2020 to 23,9%, while the Global Property Guide notes that the gross residential yield in SA has risen from 9,96% in the last quarter of 2024 to 10,36% currently.
Read more: Gross rental yields in South Africa: Cape Town and 5 other cities
"These are very positive numbers for buy-to-let investors, especially when one adds in the declining rate of new residential development in SA, which is likely to give rise to a supply shortage and rising rentals over the next few years."
