SOUTH AFRICA – Older B- and C-grade office buildings, often weighed down by high vacancies, rising municipal rates, and declining corporate demand, are increasingly being converted into affordable new housing units.
What started off as an occasional redevelopment has now become a trend across South Africa, with developers buying up poorly performing business nodes for conversion into apartments, says Paul Stevens, CEO of Just Property.
And it’s particularly visible in secondary commercial corridors in Randburg, Bellville in the Western Cape, along the KwaZulu-Natal North Coast and in parts of Gqeberha, Bloemfontein and Nelspruit, he continues.
"The iconic Golden Acre in the Cape Town CBD is one of many examples. It’s undergoing a major transformation, converting its underused office tower into 301 long-term rental apartments and 115 hybrid living units alongside upgraded retail and co-working spaces. This development mirrors the growing trend that’s redefining city centres across South Africa," he says.
According to the FNB Commercial Property Broker Survey, 19.3% of office building buyers intend converting them into residential or mixed-use properties. In Johannesburg, that figure rises to 38.1%, making Gauteng the epicentre of the conversion economy, followed by Tshwane at 14.9%.
SAPOA data bears this out. While prime-grade office vacancies have recovered post-Covid to around 6.8% nationally, B-grade offices remain stuck at 16.8% - a level that’s persisted for years. For landlords, this translates to rising holding costs: municipal rates, security, cleaning, insurance, and utilities on buildings that aren’t attracting corporate tenants.
The “missing middle”
At the same time, Stevens points out, demand for conveniently-located rentals in the R5,000 - R9,000 price range has long outstripped supply in the country’s major metros.
“Lightstone Property research shows that in the middle-to-lower income bands, 3.3 households compete for every property available. In the lowest entry-level brackets, the deficit is even higher: seven households per property. This ‘missing middle’ - young professionals and first-time buyers - is driving the fastest growing rental market in the country.”
Further, Stats SA building data indicates that approvals for traditional townhouse and apartment developments have plummeted by 25.2% year-on-year on the back of rising material and construction costs and high interest rates.
“Adaptive reuse, because it allows developers to work within an existing envelope, avoid lengthy rezoning battles, and deliver affordable housing at speed, has become a lifeline for them too,” he says.
Economics
The economics work four ways: for tenants, homebuyers, landlords and developers, Stevens notes. “Municipal approvals are quicker, and construction timelines drop significantly. Africrest Properties, for example, completed more than 1,200 apartments in four developments in a 12-month period, with thousands more in the pipeline in suburban nodes like Randburg and Sunninghill.”
Tenants and first-time buyers struggling with interest rates, transfer cost affordability and a shortage of entry-level housing close to their workplaces, are also benefiting from adaptive reuse. “Not only in terms of bricks and mortar value but also because of the reduction in commuting costs and travel time from outlying townships and peri-urban areas.”
By repurposing conveniently sited commercial buildings, developers are creating 15-minute homes that are changing people’s lives, he adds. “Residents have access to secure, precinct-style living with amenities on their doorstep. It’s a lifestyle model that’s effectively democratising city living.”
When office block stand vacant, local councils lose out on millions of rands in rates, service charges, and electricity revenue, he asserts. “Thousands of square metres of commercial space across the country are underutilised and generating minimal municipal income. Converting these buildings into occupied residential units with the resultant reactivation of utility consumption changes that, and without municipalities needing to build new roads and substations.”
Environmental impact
Demolishing existing blocks and building new ones generate massive carbon emissions, from the destruction of concrete and steel to the manufacturing and transport of new materials. “By adapting existing structures, however, developers preserve what engineers call ‘embodied carbon’ which is one of the most environmentally responsible development models around.”
What developers look for
When assessing commercial buildings for residential conversion, Stevens says developers tend to prioritise:
- Floor plate depth and window coverage: Narrower floor plates with extensive perimeter windows that ensure natural light and ventilation, and accordingly meet with residential building code requirements.
- Generous floor-to-ceiling heights: Commercial clearances of 3 metres or more allow new plumbing, drainage, and HVAC ducting without sacrificing headroom.
- Regular column spacing: Predictable grid layouts simplify the partitioning of open floorplans into micro-units.
- Parking ratios and lift infrastructure: Existing parking and lifts reduce capital expenditure.
- Location and zoning: Proximity to public transport, walkable retail, and municipalities with receptive rezoning policies streamline approvals.
Predicting further acceleration of the office conversion trend, Stevens believes it’s correcting a historical disparity. “Turning dead commercial space into thousands of homes in existing municipal grids isn’t just fixing a balance sheet problem – it’s providing the accessible housing that South Africans desperately need.”
