The Western Cape continues to stand head and shoulders above South Africa’s other provinces when it comes to property market performance. The latest Rode Report (Q2 2025) confirms that Cape Town and the broader province remain the country’s strongest performers across the office, industrial, and residential sectors, underpinned by resilient demand, limited supply, and investor confidence.
Offices: Cape Town at the Forefront of Recovery
The national office market is on a slow but steady path of recovery, but Cape Town has surged ahead. According to Rode, decentralised Grade-A office rentals in the Mother City grew at double-digit rates in Q2 2025, outperforming all other metros.
Demand is especially robust in nodes such as V&A Waterfront, Century City, Claremont, and Rondebosch, where businesses are increasingly drawn to quality spaces with reliable services and strong infrastructure. Vacancy rates in these nodes have declined further, even as the national vacancy rate for A- and B-grade offices has stabilised around 13%.
Reversions — the gap between market rentals and expiring leases — have also turned positive in Cape Town. Where landlords once had to offer discounts to attract tenants, they are now able to command higher rentals, with average reversions reaching +3,5% in Q2, a remarkable turnaround from the -9,4% recorded just a year earlier.
Investment sentiment mirrors this strength. Cape Town’s Grade-A decentralised office capitalisation rates — a measure of the yield investors require — are the lowest among major metros, averaging between 9% and 10%. This reflects lower perceived risk and confidence in the city’s long-term office fundamentals.
Industrial: Western Cape’s Star Performer
The industrial sector remains the backbone of South Africa’s commercial property market, and the Western Cape is its brightest star. Rode data shows that prime industrial rentals in Cape Town surged 14,2% year-on-year in Q2 2025, almost double the national average of 7,5%.
This growth is being driven by a potent mix of robust demand and constrained supply. Vacancy rates for industrial space are among the lowest in the country — hovering around 1% — which gives landlords significant pricing power. Demand is especially strong for logistics and warehousing facilities, reflecting the growth of online retail and the strategic role Cape Town plays as a logistics hub.
Investor appetite has followed suit. Cape Town boasts the lowest industrial leaseback cap rates nationally at ~8,7%, compared to 9%–10% in Gauteng. This signals both higher investor competition for assets and confidence in long-term rental growth.
Housing and Residential Rentals: Fastest Growth in the Country
While affordability remains a growing concern, the Western Cape housing market continues to outperform all other provinces.
- House prices grew by about 7% year-on-year in early 2025 (Lightstone index), well above both inflation and the national average of 3,7%.
- Flat rentals rose by 5,6% year-on-year in Q2 2025, compared to national rental growth of just under 4%.
- Vacancy rates for flats have stabilised at extremely low levels of 1%–3% since 2023, creating ongoing upward pressure on rents.
These trends reflect persistent demand from semigration, lifestyle migration, and strong investor interest, even as affordability constraints may temper future rental growth. For many South Africans relocating from other provinces, the Western Cape continues to represent value through quality of life, governance, and service delivery — all factors increasingly influencing property decisions.
Retail and Investment Trends
Although Rode’s detailed retail analysis is contained in a separate report, the Q2 2025 findings show that Western Cape shopping centre cap rates are also among the most favourable nationally. Regional shopping centres in Cape Town recorded cap rates averaging 8,1%, compared to national averages closer to 9%.
This again reflects lower risk perceptions by investors. High-income demographics, robust tourism, and a steady consumer base have supported Cape Town’s retail market, even in the face of national cost-of-living pressures.
Why the Western Cape is Outperforming
The reasons for the province’s consistent outperformance are multifaceted:
- Demand drivers: Semigration from other provinces, international investment interest, and tourism all underpin demand for property.
- Supply constraints: Limited new office and industrial development, partly due to high building costs, has kept vacancies low and supported rental growth.
- Investor sentiment: Strong governance, relatively better municipal service delivery, and lifestyle appeal make Western Cape assets more attractive.
- Resilience to shocks: Unlike other regions, Cape Town has bounced back more quickly from the pandemic downturn, with occupiers and investors alike seeking security in the city’s prime nodes.
Conclusion
The Western Cape property market remains the country’s most resilient and attractive across all major sectors. Cape Town continues to deliver double-digit office rental growth, the strongest industrial performance in South Africa, and the fastest-growing housing market. Investors are rewarding this strength with the lowest cap rates nationally, underscoring the province’s status as the premium property destination in South Africa.
While affordability and broader economic risks remain potential headwinds, the fundamentals suggest that the Western Cape’s leadership in the property cycle is far from over.
Source: Rode Report 2025:2, Rode Publications & Media.
