The domestic macroeconomic environment remains challenging in the near term but is expected to become progressively more supportive over the medium term as inflation moderates, borrowing costs decline and structural reforms gradually lift business confidence and investment. Real GDP growth is projected to improve modestly from 1.1% in 2025 to around 1.2% in 2026, before strengthening to 1.3% in 2027 and approaching 2.0% by 2028/29.
While the economic fallout from the Middle East conflict has weakened the near-term outlook relative to our pre-war expectations, we continue to view this shock as temporary and largely externally driven. Lower borrowing costs, easing inflation, and ongoing structural reforms are expected to support a gradual recovery in business confidence, investment, and employment over the medium term, providing a firmer foundation for a gradual strengthening in economic activity.
Key takeaways are summarised below:
- Commercial property continues to recover from its cyclical lows, but momentum weakened in 2Q26 as the macroeconomic environment deteriorated. Broker satisfaction fell sharply from 69% in 1Q26 to 39% in 2Q26, with the decline broad-based across regions.
- The deterioration in sentiment mirrors broader business confidence indicators and reflects higher operating costs associated with the Middle East conflict, as well as the SARB’s subsequent interest rate response.
- Despite the setback, the market remains on a gradual recovery path, although performance continues to differ markedly across sectors.
- Industrial and warehousing remain the strongest-performing asset class. Activity moderated from 6.21 to 5.58, but underlying fundamentals remain supported by logistics demand, warehousing requirements, and supply-chain restructuring. Johannesburg, Cape Town, and Nelson Mandela Bay remain key industrial markets.
- Retail property continues to stabilise. Cape Town and Nelson Mandela Bay remain the strongest retail markets, while Johannesburg has shown a notable recovery from the depressed activity levels recorded over the past two years.
- Office property remains the weakest segment. Activity declined from 4.84 to 4.56, with elevated vacancies, limited tenant expansion and hybrid working continuing to weigh on market conditions.
- Johannesburg’s office market is increasingly being driven by asset repositioning, with conversions to residential and mixed-use developments accounting for approximately 43% of office transaction activity.
- From an investment perspective, industrial property remains best positioned to benefit from an eventual recovery in investment spending, retail should continue improving gradually as consumer conditions stabilise, while office opportunities remain concentrated in refurbishment, repositioning, and conversion strategies.
- Looking ahead, the medium-term outlook remains constructive, supported by easing inflation, lower borrowing costs and a gradual improvement in business confidence and investment activity. However, performance is likely to remain highly differentiated across sectors, regions, and asset quality.
