#BizTrends2026 | TPN Credit Bureau's Waldo Marcus: Resilience over expansion wins the day
High building costs, skills shortages and infrastructure bottlenecks are reshaping development strategies, while developers and investors with a focus on residential and commercial property markets are being forced to adopt more defensive, adaptable and risk-aware approaches to property development and portfolio construction primarily due to a backdrop of economic strain and uneven governance.
Structural market shifts
Shaped by tightening supply, rising compliance burdens and increasing differentiation driven by municipal governance and service delivery, these are the trends shaping the property market in 2026:
1. Rental shortages reflect high construction costs
The ongoing shortage of rental accommodation, particularly in the residential market, will continue to place upward pressure on pricing. The root cause lies in the prohibitive cost and complexity of new construction. Elevated building costs, alongside the liquidation and business rescue of several construction firms, mean that new stock is entering the market at significantly higher price points, limiting viable returns on investment.
A shortage of skilled construction labour further constrains the scale of private development. Retrofitting existing buildings is proving more cost-effective than greenfield developments, requiring smaller, more flexible construction interventions and fewer expensive approvals an infrastructure investments. In Gauteng, oversupply in the office market is increasingly being addressed through commercial- to-residential conversions.
2. Infrastructure investment and reactive regulation
Government’s prioritisation of national infrastructure projects is expected to crowd out private-sector growth, while subdued economic performance may lead to more reactive regulatory intervention.
Public infrastructure spending diverts construction capacity and tax revenue away from private development. At the same time, private developers are increasingly required to fund bulk infrastructure themselves, materially eroding project returns.
These costs are ultimately passed on to tenants through higher rentals to achieve acceptable investment yields.
While modest interest-rate relief is anticipated – with two 25 basis point cuts predicted in 2026 – this is unlikely to stimulate property purchasing to the extent seen in previous cycles, given ongoing household financial strain and deferred expenditure.
Regulatory pressure is also expected to intensify. Policymakers may target high-return sectors such as short-term rentals, while additional red tape around building plans and competition approvals for large commercial asset sales could slow transaction activity, restrict capital mobility and delay new development.
3. Municipal elections and value recovery
The 2026 municipal elections are set to be a pivotal factor for property performance, placing a renewed spotlight on municipal finances,
governance and service delivery.
Regardless of political outcomes, winning administrations are likely to implement higher rates and tariffs to stabilise liquidity and restore basic services.
Investors are increasingly directing capital towards areas demonstrating consistent governance, functional infrastructure and improving service delivery. Municipal performance is becoming a key determinant of property value.
Areas showing tangible improvements in safety, infrastructure reliability and service delivery may experience a recovery in property values as investors seek value-for-money opportunities in existing stock rather than expensive new developments, particularly to support affordable rental demand.
4. Tenant risk and property valuations
Tenant risk is emerging as a central determinant of property valuation. The true value of a rental asset lies in the stability and predictability of its income stream, not speculative capital appreciation. Rising inequality and the proliferation of informal settlements underscore the importance of reliable tenant performance.
High-risk tenants materially erode portfolio value, while tenants in good standing – those who consistently pay in full and on time – enhance long-term investment returns. Although liquidations have declined, the continued prevalence of business rescues highlights elevated tenant risk, particularly in the commercial sector.
Single-tenant commercial properties anchored by one large tenant face heightened exposure. Diversified, multi-tenant portfolios are increasingly the preferred risk-mitigation strategy.Investor guidance for 2026
Against this backdrop of rising costs, regulatory complexity and shifting market dynamics, investors will need to recalibrate their strategies for 2026.
The year ahead will reward investors who prioritise adaptability, tenant risk management and geographic selectivity, as opposed to new, capital-intensive developments.
Property investors should adopt a defensive, risk-aware posture anchored in resilience and adaptability. The strongest value propositions lie in existing buildings that can be upgraded or repositioned, avoiding the elevated costs and risks associated with new construction.
Given persistent municipal service delivery challenges, landlords must now incorporate infrastructure resilience into their investment assumptions. Solar power, backup water systems and enhanced security are no longer optional extras; they are essential features for attracting and retaining tenants across both residential and commercial sectors.
Commercial investors should prioritise convenience-based retail centres and smaller industrial parks located closer to residential areas, aligned with evolving logistics, e-commerce and last-mile distribution trends.
Rigorous tenant screening, continuous monitoring and proactive arrears management are no longer negotiable. Effective tenant-risk management is critical to protecting income stability and preserving asset valuations.
1. Rental escalations and market dynamics
The impact of these forces is already being felt across both residential and commercial rental markets.
A persistent shortage of residential rental stock remains the primary driver of rental price growth. On the commercial side, particularly within the office sector, structural headwinds persist, although vacancy rates have shown modest improvement due to the limited volume of new supply entering the market.
TPN forecasts residential rental escalations of between 4.5% and 5.5% in 2026, supported by continued demand in key Gauteng residential nodes. Commercial-rental escalations, however, are expected to soften further, with office-space growth dipping to approximately 3.0%. Notably, select asset classes, including storage facilities, industrial hubs and convenience-based retail are displaying stronger fundamentals.
Regionally, the Western Cape is expected to see some easing in residential rental-stock constraints, but affordability remains a critical challenge moderating rental growth. Seasonal pressure persists in the fourth quarter as tourism drives short-term rental demand.
Gauteng is expected to maintain an upward trajectory in rental escalations, partly mitigated in part by the growing trend of commercial-to-residential conversions.
Rental growth in the Eastern Cape is forecast to remain largely flat, while KwaZulu-Natal is expected to see continued, albeit slower, escalation driven by demand for secure coastal properties.
2. Defensive investment strategies
In conclusion, the 2026 property market will be defined less by growth ambitions and more by strategic resilience. High construction costs, regulatory complexity and infrastructure constraints are shifting investor focus away from new developments and towards adaptable, income-secure assets.
Municipal governance and service delivery are now inseparable from property performance, driving a clear flight to quality locations.
Investors who successfully manage tenant risk, invest in asset resilience and align capital with functional municipalities are best positioned to achieve sustainable returns in the year ahead.
