What makes a good commercial property investment in South Africa
Tenant covenant, lease length, location, sector and building quality — what drives returns and what destroys them.
Reviewed by Joe Sokolic · Updated
Commercial property returns come from income (the yield) and capital growth. The factors below drive both — and getting one badly wrong can wipe out the return from everything else.
Tenant covenant
Who pays the rent, and how safe is that income? A national retailer or listed company on a long lease is a different asset from a single small business month-to-month. The strength of the tenant is the single biggest driver of the cap rate.
Lease length and structure
Weighted average lease expiry (WALE) — how long until the leases roll off. A long WALE is worth paying for; a building with everything expiring in 18 months carries real re-letting risk.
Location and sector
A well-located building in a growing node holds value and re-lets easily. Sector matters: logistics and well-located convenience retail have held up; secondary office has been under pressure. See our market notes.
Building quality and cost to run
Older buildings carry higher maintenance and capex, higher vacancy risk, and rising municipal costs. A cheap yield on a tired building often reflects money you'll spend later.
The number that matters
Total return after all costs and realistic vacancy — not the headline yield on a broker's sheet.