Retail property shake-up: Why tenants are calling the shots

South Africa's retail property market is offering tenants greater negotiating power due to a challenging environment for new development and occupancy, according to Samuel Theu, national property manager at Atlas Finance. Businesses that comprehend landlords' needs can leverage the current market to secure better deals. Theu notes that often, the spaces businesses avoid today are where the best opportunities lie.

If tenants understand how landlords think and what they require from a quality tenant, they can approach negotiations differently. The broader property market remains under pressure, with Statistics South Africa reporting a 7.2% decline in the real value of completed buildings in the first half of 2026, and non-residential buildings falling 26.4%.

Investec economist Lara Hodes highlights that the value of buildings completed by larger municipalities fell 10.2% in the second quarter, while residential completions declined 10.9%. However, the pipeline shows some positivity, with building plans passed increasing 1.3% year-on-year, and non-residential plans rising 10.7%. The growing pool of retail and commercial space that is difficult to fill has altered the negotiating dynamics between landlords and tenants.

Landlords facing vacant space may be more willing to negotiate on rental rates, lease terms, fit-out contributions, flexibility, and commitment periods. Tenants that can demonstrate a sustainable business, strong customer base, and long-term commitment can be more attractive to landlords. Theu believes businesses should use the savings from lower occupancy costs to enhance the customer experience, such as better shop-fitting, more comfortable environments, and improved climate control.

A well-designed and professionally fitted tenant can improve the attractiveness of an entire retail node, potentially benefiting surrounding spaces. Traditional property assessments may not capture the full picture, as accessibility is now influenced by transport costs, travel time, and mobile data costs. The next phase of retail property growth may not come from traditional shopping centers, but from smaller-format branches, satellite locations, and modular buildings in communities where conventional retail space is limited. Brick-and-mortar remains a significant growth engine in the market when used strategically.