Cushman & Wakefield | BROLL forecasts the end of the long-running ‘tenant market’ cycle as office property demand-supply dynamics shift in favour of landlords.
The global commercial real estate services firm expects an increase in office real estate transactions, driven by solidified hybrid work policies, tenant-led office design changes, and the resurgence of new developments in select locations.
In addition to positive sentiment spurred by South Africa’s new Government of National Unity and the early impact of lowering interest rates, a major driver for the office property market is the growing clarity on the evolving nature of work.
Many businesses have adapted to new operational models, supporting effective corporate real estate strategies and boosting decision-making confidence. These developments enhance the attractiveness of real estate investment, despite challenges like slow GDP growth.
Cushman & Wakefield | BROLL’s Capital Markets division predicts that 2025 will be a pivotal year for the sector, as strategic property portfolio rebalancing takes centre stage.
Key players will likely seek to divest non-core assets, recycle capital to strengthen balance sheets, and focus on core strategies.
This shift is largely driven by high loan-to-value ratios (LTVs) in listed and unlisted property funds, elevated interest rates, and squeezed EBITDA margins, according to Thabo Mofokeng, dealmaker at Cushman & Wakefield | BROLL’s Capital Markets division.
“Even with the possibility of further interest rate cuts, these factors are prompting a renewed focus on investment strategies. This has led to a clean-out of non-strategic assets, creating opportunities for buyers with strong liquidity profiles,” Mofokeng said.
“As interest rates decrease, the appetite for deals is expected to rise, which is an exciting development.”
However, a potential challenge lies in the mismatch between buyer and seller expectations. “Sellers asking for premiums above book value could dampen buyer interest, especially among those looking to unlock value from investments,” he added.
Cushman & Wakefield | BROLL’s Transaction Services Division anticipates significant shifts in office market dynamics for 2025, with hybrid work models solidifying as a defining trend, according to Calvin Crick, MD of the division. The resurgence of the office market and the evolving nature of office environments are exciting prospects.
“Firmer hybrid work policies should stabilise office occupancy, providing a clearer, more consistent demand profile that allows for strategic office space management,” Crick said.
Supporting this stability, many companies have realized that in-person collaboration creates stronger culture and better execution, prompting them to reassess workspace strategies. As a result, companies are rethinking how they use office space to enhance collaboration and productivity.
While employee office occupancy rates have risen, they are still lower than five years ago. However, competing with the flexible work-from-home model remains a challenge when retaining talent. “To address this, companies must create appealing office environments that support roles requiring in-office presence, aligning these spaces with organizational needs,” Crick noted.
“A well-defined hybrid strategy paired with the right real estate and workplace solutions is critical for operational efficiency.”
This shift will lead to a strategic re-evaluation of the workspace.
“We expect a rise in demand for commercial office space in 2025,” said Angus Murray of Cushman & Wakefield | BROLL Transaction Services. “This will likely result in lower office vacancies, potential real rental growth, and a shift towards market equilibrium, ending the tenants’ market that has dominated in recent years. It could even spark new office developments in areas where demand exceeds supply.”
Though it may be too early to see clear evidence of the change in office demand-supply dynamics, numerous indicators suggest it is on the horizon. Key factors like the return to office work and evolving workplace designs are fuelling office demand.
At the same time, South Africa’s improved political stability, the suspension of load shedding, and lower interest rates are providing a favourable environment for businesses to execute real estate strategies.
