From office recoveries to industrial strength and a housing rebound, we unpack the key trends shaping the new year.
The final Rode Report for 2025 is in, and the message is clear: the South African property market is entering 2026 with renewed momentum. After a challenging few years, the data confirms a broad-based recovery, driven by lower interest rates, easing inflation, and a significant uplift in investor sentiment.
Here are the key takeaways from the Rode Report 2025:4 that every property professional needs to know.
1. The Office Market is (Finally) Recovering
The long-awaited office rebound is underway. As employees return to physical workplaces, vacancy rates are declining and rentals are firming.
- The Numbers: National vacancies for prime decentralised space dropped to 11.7% in Q4, down from 12.5% a year prior. This supported nominal rental growth of 3.5% year-on-year.
- The Cape Town Factor: The Mother City continues to outperform, boasting rental growth of 8.6% and the lowest vacancy rates in the country. The flight-to-quality trend is strong here, with tenants flocking to modern, amenity-rich buildings.
- The Lagging Node: Johannesburg is feeling the most pressure, with rental growth grinding to just 0.5% .
2. Industrial Property: The Undisputed Champion
For the third consecutive year, industrial property is the best-performing non-residential sector. The e-commerce boom and limited speculative development have created a perfect storm of low vacancies and high demand.
- Rental Growth: Nationally, rentals for prime 500m² spaces surged by 8.1% year-on-year.
- Vacancies: The sector maintains an enviably low vacancy rate of just 3.9% , though this is showing slight signs of edging up.
- Regional Stars: Cape Town’s industrial market is on fire, with rentals now rivaling Durban’s for the first time in two decades, driven by limited supply and robust demand.
3. Residential: A Tale of Two Markets
The residential sector is showing clear signs of a two-speed recovery, divided by geography and price point.
- House Prices on the Mend: After years of stagnation, nominal house prices are recovering. The FNB index recorded a 4.7% increase in November, marking the seventh consecutive month of real price growth (after inflation).
- Apartments Stabilising: National apartment vacancies held steady at 5.3% . Rental growth, while slightly slower than in 2024, is no longer declining in real terms.
- The Western Cape Dominance: The province remains the jewel in the crown. Rental growth leads the nation at 5.4% , vacancies are in the low single digits (1-3%), and houses are selling faster than anywhere else (approx. 6 weeks on market).
4. Investor Confidence is Back
The recovery isn't just about fundamentals; it's about sentiment.
- Listed Property Boom: The SA Listed Property Index (SAPY) soared by 23% in 2025.
- Cap Rates Stable: Capitalisation rates remained largely stable, with prime industrial leasebacks at 9.3% and decentralised A-grade offices at 11.2% . Cape Town continues to command the lowest (best) rates, reflecting its lower perceived risk.
- REITs in Demand: Several property companies successfully raised capital in Q4, with issues heavily oversubscribed—a clear vote of confidence from the market.
The Watchprop View
The Rode Report confirms that the tide has turned. Lower interest rates, improved business confidence, and a return to pre-COVID working patterns are providing a powerful tailwind.
However, as the report notes, caution remains warranted. Economic growth is not expected to "shoot the lights out," and the high cost of construction continues to cap new development. For 2026, the strategy is clear: focus on the fundamentals. Look to the Western Cape, target well-located industrial assets, and prioritise modern, high-grade office space that meets the demands of today's workforce.
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