Joburg commercial property undervalued by nearly R200bn compared to Cape Town

According to a new analysis by South African commercial property data company Gmaven, Johannesburg’s commercial property market is valued nearly R200bn below comparable Cape Town-adjusted levels.

The study draws on Gmaven’s database and examines, for the two municipalities, 25 700 properties alongside 1 706 high-value commercial property transactions recorded since 2020.

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Properties were matched by category, grade, size, location and, where relevant, retail submarket to compare similar assets across the two municipalities.

Johannesburg contains 44.9 million square metres of rentable commercial space, 54% more than Cape Town’s 29.2 million square metres. Despite that difference, Gmaven estimates the two markets are worth roughly the same, at R376 billion for Johannesburg and R365 billion for Cape Town.

Cape Town and Johannesburg municipalities: rentable space by property category. Image: Gmaven

Commercial property gap driven by struggling office market

The largest divergence appears in offices. Johannesburg office space has traded at a weighted average of R10 121 per square metre since 2020, compared with R20 524 in Cape Town.

Capitec’s recent acquisition of an A-grade Sandton office building illustrates the scale of the discount. The bank paid R245 million for 21 946 square metres, equivalent to R11 164 per square metre, including parking.

Gmaven estimates that constructing a comparable building today would cost at least R28 000 per square metre, before land.

“Johannesburg has been regarded as a value market for years, but the size of the gap has never been clear,” says William Harris, CEO of Gmaven.

“By comparing equivalent properties and completed transactions, we can quantify Johannesburg’s discount to Cape Town and identify which parts of the market account for most of the potential recovery.”

Commercial property values per municipality by specific valuation type. Image: Gmaven

Municipal performance seen as key factor behind valuation gap

The analysis covers offices, industrial premises, retail properties, and a “specialist” category that includes assets such as hotels, hospitals, education and storage.

The discount is not evenly distributed. Office property accounts for over 40% of the estimated R196 billion gap, while retail and other commercial assets contribute most of the remainder. Industrial property, which is more commonly owner-occupied, has retained more of its value in Johannesburg.

Johannesburg and Cape Town operate within the same national economy and share a currency, central bank, tax system, sovereign risk profile, and many of the same landlords – listed and private.

Gmaven says the divergence suggests that local conditions, including municipal performance, are influencing asset values.

“The R196 billion figure should not be read as a guaranteed windfall or an immediate forecast,” Harris added.

“It represents the scale of the potential rerating if better municipal performance helps restore business confidence, occupier demand, investment, and development activity.”

Johannesburg municipality’s financial upside, in billions of rand, by contributing property category. Image: Gmaven

Coming down to the vote

According to Gmaven, South Africa’s local government elections in November provide a potential test of the above thesis.

Sustained improvement in service delivery and city administration could influence vacancy levels, investment decisions, and the prices buyers are willing to pay for Johannesburg assets.

Gmaven’s analysis also estimates that replacing Johannesburg’s existing commercial property stock would cost roughly R857 billion, compared with its estimated market value of roughly R376 billion.

Within that total, office and retail assets are trading particularly far below the cost of replacing the buildings already in place.

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