South Africa’s commercial property market is recovering from its cyclical lows, but the pace slowed markedly in the second quarter of 2026 as the broader economy came under renewed pressure. According to FNB Economics’ latest Commercial Property Broker Survey, broker satisfaction with prevailing market conditions fell from 69% in the first quarter to 39% in the second, a decline spread broadly across regions rather than confined to any single market.
The setback tracks a wider deterioration in business sentiment, driven largely by higher operating costs linked to the conflict in the Middle East and the South African Reserve Bank’s subsequent interest rate response. FNB economist Siphamandla Mkhwanazi notes that fixed investment in both residential and non-residential property remains well below pre-pandemic norms, an indication that business confidence has yet to recover sufficiently to support broad-based development activity. Real GDP growth is projected to edge up from 1.1% in 2025 to around 1.2% in 2026, before strengthening to 1.3% in 2027 and approaching 2% by 2028/29, with the bank characterising the current shock as temporary and largely externally driven rather than structural.
Performance across property types has diverged sharply. Industrial and warehousing remains the standout segment, even as its activity rating eased from 6.21 to 5.58 quarter on quarter, a pullback FNB attributes to cyclical cooling rather than any weakening in underlying fundamentals. Johannesburg posted an industrial rating of 5.93, comfortably ahead of its office score and underscoring that Gauteng’s property weakness sits squarely in the office sector rather than logistics assets. Cape Town and Nelson Mandela Bay recorded 6.00 and 5.83 respectively, reflecting sustained coastal demand for logistics space.
| Segment | 1Q26 rating | 2Q26 rating | Strongest region (2Q26) |
|---|---|---|---|
| Industrial & warehousing | 6.21 | 5.58 | Cape Town (6.00) |
| Retail | 5.23 | 4.93 | Cape Town (6.71) |
| Office | 4.84 | 4.56 | Cape Town (6.22) |
| Broker satisfaction (overall) | 69% | 39% | — |
Retail property occupies the middle ground, with its activity rating slipping from 5.23 to 4.93, though FNB frames this as a normalisation rather than a renewed downturn, given the sector remains markedly stronger than it was two years ago. Cape Town and Nelson Mandela Bay again lead, at 6.71 and 5.83 respectively, buoyed by stronger local economic activity and population inflows. Johannesburg’s retail market has shown a more notable turnaround, climbing from levels of around 3.4 to 3.9 through much of 2024 to 5.19 in the second quarter, a recovery FNB links to the rationalisation of weaker centres and more disciplined asset management rather than a broad demand surge.
Office property remains the laggard, with its rating falling from 4.84 to 4.56, still above its long-term average of 4.16 but constrained by elevated vacancies, limited tenant expansion and the ongoing structural shift toward hybrid working. Regional divergence is stark: Cape Town leads at 6.22 and Nelson Mandela Bay follows at 5.80, while Johannesburg, Tshwane and eThekwini trail at 4.50, 3.93 and 3.77 respectively. In Johannesburg specifically, brokers report that conversions of office stock to residential and mixed-use developments now account for roughly 43% of transaction activity in the city, an indication that demand is increasingly driven by asset repositioning rather than conventional occupier expansion.
FNB expects this uneven pattern to persist into the medium term. Industrial property is best placed to benefit from any eventual recovery in investment spending, retail should continue improving gradually as consumer conditions stabilise, and office opportunities are likely to remain concentrated in refurbishment and conversion strategies rather than new development. The bank’s broader forecasts point to inflation cooling toward 3% by 2028, the repo rate declining to 6% over the same period, and gross fixed capital formation growth recovering from a 2.2% contraction in 2025 to modest positive growth from 2026 onward, conditions it regards as supportive of a broader, if gradual, property market recovery.
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