Technology's Impact on Commercial Real Estate Has Only Just Begun
Technology's Impact on Commercial Real Estate Has Only Just Begun
An interesting article by Rael Levitt, Founder and CEO of PropTech
Commercial real estate—long considered a stable, conservative sector—is experiencing a seismic shift driven by rapid technological change.
Even if it seems "business as usual," the transformative wave gains momentum. New tech-driven competitors and evolving consumer behaviours are already reshaping the market, from office towers in Sandton to small retailers on Sea Point Main Road and big-box logistics facilities in Clairwood.
Yet, in discussions with South African property managers, you may still hear that online shopping hasn't truly hurt foot traffic or that offices are "back to normal" because buildings in Cape Town are filling up. Disruption, however, rarely unfolds through a single "big bang." It accelerates in phases: slow at first, then unstoppable once it gathers speed. Given rapid AI developments, it's naïve to assume that commercial real estate will remain untouched.
Below is an overview of how technology continues to redefine the property sector, framed through the Four Phases of Industry Disruption.
Phase 1: Initiation
In this early phase, new technologies emerge, but their broader industry impact remains subtle. A few years ago, e-commerce in South Africa was considered a fringe concept. Many wondered whether local shoppers would trust digital storefronts or if a developing economy had the infrastructure to support large-scale online retail.
Slowly, however, these ideas started gaining traction. The pandemic accelerated digital adoption and introduced new possibilities—from online grocery shopping to remote working. While brick-and-mortar stores continued to dominate, consumer openness to tech-driven solutions grew. Meanwhile, the remote work experiment showed that, although managing dispersed teams can be challenging, people can work productively from different locations.
Phase 2: Disruption Gains Momentum
South Africa is entering Phase 2, where the market begins to recognise the potential of new tech-driven business models and leading companies to ramp up investment. Consider two significant trends:
E-Commerce and Warehousing Although online shopping remains under 10% of retail sales, analysts predict it could double in the coming years. Large retailers are embracing online channels like never before, offering convenient "click and collect" options and building robust delivery networks. Warehousing and logistics properties have become star performers, particularly around Johannesburg, Cape Town, and Durban—clear evidence that investors see e-commerce as a genuine engine for future demand.
Data Centers: The Quiet Revolution Data centres are rapidly emerging as a coveted asset class fueled by internet usage, cloud computing, and AI adoption. These facilities, long overlooked in South Africa, now attract local and international players. Smaller colocation centres—where multiple organisations share infrastructure—reflect the growing need for secure data processing. As AI proliferates, data centres closer to end-users (edge computing) will become even more vital. Investors who never considered "tech real estate" now see data centres as stable, high-return opportunities.
At this stage, many traditional real estate players remain sceptical—malls are packed on weekends, and Cape Town offices are filling up again. But consumer expectations and business strategies are evolving quickly beneath the surface.
Recent statistics underscore this point:
Uber South Africa employs 52,000 drivers—more than Woolworths and Spar combined—and serves 1.4 million active riders—this ripple effect on employment, supply chains, and commercial space use.
Delivery-only dark Stores and Kitchens are rising due to Checkers Sixty60's and Uber Eats' success, prompting the creation of dedicated online last-mile fulfilment hubs. The retail rule now is simple: "If you can click it, it will be delivered."
Phase 3: The Turning Point
Though not yet, Phase 3 is when disruption becomes too big to ignore. In more advanced e-commerce markets—like the UK (where online retail exceeds 30%) or China (over 50%)—traditional retail closures have become commonplace, with vacant malls repurposed for micro-fulfillment centers or other uses.
Will South Africa follow the same path? Possibly not in all segments. Township and convenience retail remain resilient, given cash-based purchases and community-centric shopping habits. However, urban and suburban malls could feel the pinch of growing online sales and shifting preferences. Retailers might opt for smaller footprints or hybrid models that merge physical and online channels. Some malls could transform into mixed-use developments, blending residential, office, and logistics in a single location.
During this turning point, capital investment often shifts dramatically. If demand for e-commerce and data centres soars, more money will flow into industrial parks, high-tech infrastructure, and cloud computing. Retail properties that fail to adapt risk declining occupancy and lease rates. For their part, offices will become smaller and smaller due to administrative functions being taken over by AI agents and real people wanting more flexible work arrangements.
Phase 4: The New Normal
Phase 4 marks the point where tech-driven models become the standard. Traditional approaches either adapt or fade away. While it's challenging to predict precisely when South African real estate will arrive here, global precedents suggest it may happen sooner than expected, as adoption follows an exponential curve once proven viable.
By Phase 4, data centres and digital infrastructure could be as integral to a real estate portfolio as offices and retail once were. Retail will continue to be split into two categories: ultra-convenient online shopping with same-day delivery and destination malls offering entertainment and social experiences that can't be replicated on a screen. Offices will evolve into small collaborative hubs that drive culture, and logistics parks will become essential arteries of supply chains. Flexibility and technology integration will define this "new normal."
One Revolution, Many Waves
Lasting revolutions don't happen overnight. They unfold in waves, shaped by shifting consumer demands, emerging business models, and evolving infrastructure. The fact that traditional offices and malls still exist doesn't mean technology's impact has stalled. If anything, the most significant changes lie ahead.
For local investors, developers, and property managers, the imperative is to look beyond the surface—beyond crowded malls and temporarily bustling offices—to understand more profound shifts like rising e-commerce, the logistics boom, and the accelerating momentum of AI. These signals aren't mere side stories but strong indicators of what's to come.
South Africa is moving from Phase 1 to Phase 2, where technology's influence expands, and savvy investors are hedging their bets. Eventually, we'll reach Phase 3, when no one can ignore the irreversible transformation of retail, logistics, offices, and data infrastructure. Then comes Phase 4, where tech-driven models dominate.
So, is technology still poised to disrupt real estate? Absolutely—and more profoundly than ever before. The real question isn't whether it will happen but how quickly and in which forms. From e-commerce to data centres, from remote work to AI-driven building operations, the future of South African commercial real estate is just beginning its tech-driven journey. Buckle up for the subsequent phases because this disruption has only started.