Q1 Rode Report 2025 - Key Insights

We are pleased to share key insights from the Quarter 1 Rode Report 2025 (www.rodemedia.co.za), focusing on the South African property market. Our highlighted insights places a special emphasis on the Western Cape. Published by Rode Publications & Media, this report highlights the resilience and growth of the property sector in Q1 2025, with the Western Cape leading the way.

Key Highlights for the Western Cape Property Market

1. Residential Rental Market

• Accelerated Rental Growth: The Western Cape continues to outperform other regions, with residential rental growth reaching 5.4% in Q1 2025, driven by strong demand and low vacancy rates. Flat vacancy rates have stabilised at 2-3% since 2023, reflecting a tight market.
• Affordability Concerns: Despite robust growth, affordability constraints may limit significant rent increases in some segments.

2. Industrial Property Market

• Significant Rental Increases: Cape Town's industrial rentals have surged, with nominal gross market rental growth for 500m² units rising by 14.8% year-on-year, outpacing the national average of 7.3%. This growth is attributed to low vacancy rates (around 3.7%) and high demand for logistics-focused properties, particularly warehouses supporting online retail.
• Market Dynamics: A Rode panellist noted that low vacancy rates in major industrial areas result in quick stock turnover, reducing opportunities for rental discounts.

3. Office Property Market

• Strong Recovery: Cape Town leads the national office market recovery, with decentralised grade-A office rentals growing by 11.7% in Q1 2025, significantly above the national average of 4.8%. This growth is 22% higher than pre-COVID levels, driven by better governance, reliable infrastructure, and lifestyle appeal.
• Low Vacancy Rates: All major decentralised nodes in Cape Town report vacancy rates below 10%, compared to the national average of 12.8%, indicating a healthier office market.

4. Capitalisation Rates

• Stability Maintained: Capitalisation rates for non-residential properties remain stable, with grade-A multi-tenanted decentralized office properties at 11.2%, prime industrial leasebacks at 9.5%, and regional shopping centres at 9%. This stability reflects positive property fundamentals despite economic uncertainties.

5. House Prices

• Emerging Growth: House prices in the Western Cape are showing signs of recovery, with national nominal house price growth at 1.8% in the first four months of 2025, supported by lower inflation, higher wages, and slightly reduced interest rates compared to 2024.

6. Regional Outperformance

• Cape Town's Advantage: The Western Cape, particularly Cape Town, benefits from perceived better governance, reliable power, and water supply, boosting investor confidence and driving demand across all property sectors.

National Context

• Overall Resilience: The South African property market remains robust despite global trade tensions, local VAT hike disputes, and political uncertainty. Industrial and retail properties perform strongly, while the office market shows modest recovery.
• Economic Outlook: Rode anticipates moderate economic growth, subdued inflation, and lower interest rates for the remainder of 2025, though global uncertainties warrant cautious optimism.

Implications for Property Management

The Western Cape's strong performance underscores opportunities for optimising rental income, particularly in the industrial and residential sectors. However, careful management of tenant affordability and strategic leasing approaches will be key to maximising returns. 

The Watchprop team is committed to leveraging these market trends to enhance the performance of your property portfolio.

For further details or personalized advice on your properties, please contact us on 0219146660 or email us at info@watchprop.co.za.