The retail property market in South Africa offers tenants greater negotiation opportunities as landlords face difficulties in developing new properties and ensuring space occupancy.
According to Samuel Teo, National Property Manager at Atlas Finance, who has worked with both sides of the landlord-tenant relationship, companies that understand the needs of property owners can use the current market situation to strike more favorable deals.
Teo noted that 'spaces that many businesses avoid today are often places with the greatest potential.' He added that knowing how landlords think and what they need from a quality tenant fundamentally changes the negotiation approach.
The broader real estate market continues to face pressure. According to the latest statistics from Statistics South Africa, the real value of completed buildings in the first half of 2026 decreased by 7.2% compared to the same period last year. A significant part of this decline was made up of non-residential buildings, whose value fell by 26.4% in real terms.
Under Pressure
Economist Lara Hodges of Investec reported that the value of buildings constructed by large municipalities decreased by 10.2% in the seasonally adjusted figure for the second quarter compared to the first. Meanwhile, residential properties showed a decrease of 10.9%, while non-residential ones saw a drop of 1.7%.
However, development prospects look somewhat more encouraging. Statistics South Africa reported that the real value of approved construction plans increased by 1.3% in the first half of 2026 year-on-year, with plans for non-residential properties growing by 10.7% and housing by 2.9%.
Hodges also pointed to a decline in construction confidence: the FNB/BER Construction Confidence Index dropped from 42 in the first quarter to 38 in the second. She emphasized that insufficient new demand remains a serious constraint for businesses.
Teo explained that the growing supply of vacant retail and commercial spaces has changed the dynamic of negotiations between landlords and tenants. Landlords facing vacancies may be more willing to make concessions not only on rental rates but also on lease terms, fit-out contributions, flexibility, and commitment periods.
In Teo's view, the opportunity lies in tenants understanding the landlord's commercial reality rather than approaching negotiations solely to secure the lowest rent. He stated that tenants capable of demonstrating stable business, a strong customer base, and long-term commitments will be more attractive to landlords.
Better Environment
Teo believes that improving lease terms is only part of the potential benefit. He suggests that businesses should consider redirecting some of the savings from rent back into enhancing the customer experience, including better store fit-outs, creating more comfortable environments, and improving climate control.
Reiterating his point, Teo said: 'If you understand how landlords think and what they need from a quality tenant, you approach negotiations completely differently.' He added that for customer-focused businesses, the physical environment can influence trust, confidence, and ultimately, business results.
Teo also sees potential benefits for landlords. A well-designed and professionally equipped tenant can increase the attractiveness of the entire retail node, potentially making neighboring spaces more appealing to other prospective tenants.
Importance of Location
Teo noted that traditional property valuations, which focus on demographics, foot traffic, and income levels, do not always reflect the full picture. Accessibility, he said, is now determined not just by distance, as transport costs, travel time, and mobile internet expenses can affect whether a customer visits a branch.
This opens up opportunities in locations that might seem weak using traditional property metrics but perform well because they naturally fit into customers' daily routes, Teo explained. This approach is particularly relevant for financial services, as institutions consolidate branches while still needing to maintain accessibility to customers in underserved communities.
Consistency Creates Value
Teo stated that a visible and consistent physical presence plays an important role in building familiarity and trust, especially in sectors where trust is central to customer relationships. Consistent observation of the same branded branch in the same location helps build business confidence.
For property owners, Teo stressed that long-term, well-maintained tenants can help stabilize retail nodes, strengthen demand from neighboring tenants, and increase the appeal of adjacent spaces.
He speculated that the next phase of retail property growth may not come from traditional shopping malls. Smaller format stores, satellite locations, and modular buildings could create opportunities in communities where traditional retail space is limited or absent. Teo concluded that 'brick-and-mortar construction is not outdated infrastructure. When strategically utilized, it remains one of the most underrated drivers of growth in the market.'