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SA REIT Association

SA REIT Association and Nedbank CIB partners on new Sustainability Guide

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The South African Real Estate Investment Trust Association (SA REIT) has announced a strategic partnership with Nedbank Corporate and Investment Banking (CIB) to launch the SAREIT Sustainability Guide, aimed at establishing sustainability standards and best practice benchmarks for the real estate sector in South Africa.

The SAREIT Sustainability Guide, scheduled for release in the coming months, will be an essential resource for property professionals, investors, and stakeholders dedicated to sustainable development. It provides actionable strategies to enhance environmental, social, and governance (ESG) performance within the real estate industry, aligning with global sustainability goals and reinforcing SA REIT and Nedbank CIB’s commitment to driving positive change in the property sector.

Joanne Solomon, Chief Executive Officer of SA REIT Association commented: “The partnership with Nedbank CIB marks a significant milestone for SA REIT as we strive to foster sustainability within our industry.

“The SAREIT Sustainability Guide will equip our members with the tools needed to implement sustainable practices, contributing to the long-term resilience and success of the real estate sector.”

Solomon said the Johannesburg Stock Exchange (JSE) is considering revising its Sustainability and Climate Change Guidance, and the SAREIT Sustainability Guide’s release is strategically timed to incorporate any potential forthcoming changes, ensuring it remains relevant and comprehensive.

Leading financier

Nedbank CIB has been a leader in promoting sustainability within the financial and real estate sectors. As a pioneer in sustainable finance, Nedbank CIB has consistently championed initiatives that integrate ESG considerations into business operations and investment decisions. Their extensive portfolio of green finance solutions and establishment of in-house EDGE Expert green certification services underscores their commitment to supporting the transition to a low-carbon economy.

Genevieve Naidoo, Property Finance Divisional Executive at Nedbank CIB said: “Our collaboration with SA REIT on the SAREIT Sustainability Guide reflects Nedbank CIB’s ongoing dedication to advancing sustainability across all sectors, particularly in real estate.

“By leveraging our expertise in sustainable finance, we aim to drive the adoption of responsible practices within the real estate industry, fostering long-term growth and resilience.”

Nedbank CIB’s involvement in the SAREIT Sustainability Guide project exemplifies its role as a catalyst for sustainable development in real estate. The bank has been instrumental in financing numerous environmentally and socially responsible real estate projects, contributing to South Africa’s sustainable development goals. Through this partnership, Nedbank CIB aims to further extend its impact, ensuring that sustainability becomes a core principle within the real estate sector.

The SAREIT Sustainability Guide will be available to SA REIT members and the broader property community. For more information on the guide and the partnership, please email info@sareit.co.za

SA listed property sector outshines bonds, equities and cash year-to-date

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SA’s listed property has outperformed bonds, equities and cash year-to-date, and with rate cut expectations, the sector is likely to see further growth in earnings, higher retail spending and share price up-side over time, according to an independent property analyst.

In recent months, the sector has seen a rally driven by the US Federal Reserve signalling an end to the rate hiking season, positive sentiment with the formation of the Government of National Unity (GNU), and the anticipation of interest rate cuts in South Africa.

Keillen Ndlovu, Independent Property Analyst commented: “In global comparison, SA listed property outperformed other asset classes year-to-date thanks to their diversified portfolios whereas globally, listed property with mostly specialised assets underperformed and delivered marginally positive returns of 2.9% in Rand terms.”

Year-to-date to July, SA’s listed property has delivered 14.4% in returns (income and capital growth) compared to bonds (9.8%), equities (10.0%) and cash (4.9%). The sector has recovered from being the worst performer delivering a negative 2.2% over the same period in 2023, said Ndlovu.

Positive outlook 

Joanne Solomon, CEO of SA REIT Association said rate cuts will benefit the listed property sector leading to a recovery in lending and capital markets which may result in increased investment activity.

“Our members are reporting an improvement in property fundamentals – declining vacancy rates, rental increases – albeit off a low base, and demand for space, especially in industrial and logistic, retail and select office assets in key locations.

“We expect property fundamentals and earnings to continue to improve.”

A Real Estate Investment Trust (REIT) is an international standard for property investment, where a tax dispensation ensures a flow-through of net property income after expenses and interest. In 2013, there were 54 real estate listed stocks on the JSE – this figure was down to 46 at the end of the first quarter of 2024.

There are currently 35 locally focused listed property stocks on the JSE of which 29 are REITs and six are non-REITs. There are 11 offshore-focused stocks, of which seven are REITs and four are non-REITs, according to research done by Ndlovu.

Ndlovu was speaking at a recent Unlock the Stock Webinar focusing on the South African REIT sector with market analysts, The Finance Ghost and Mark Tobin.

“I believe that REITs are highly investable at this point in the cycle – investors benefit from a selection of high-quality JSE-listed REITs whose management teams have lived through tough economic cycles,” said The Finance Ghost.

The Finance Ghost said REITs have the potential to perform well from this point onwards given the significant renewed optimism around South Africa and anticipated rate cuts.

Certain REITs appeal to investors in developed countries with growth rates like Spain and Poland as well as developed markets like the UK with lower risks in general.

Ndlovu said that even though REITs earnings will likely decline by 3%-4% on average this year mainly because of higher interest rates, earnings will return to positive territory in 2025 and to inflation-beating levels in 2026.

“If the economy grows faster and interest rate cuts happen sooner and more aggressively, we can see robust growth in earnings earlier than 2026.”

Over the past few years, the sector has seen a decline in equity raised. From raising R69.4bn in 2014, SA listed property raised R7.4bn in 2023. There  has been decent activity so far this year with Vukile Property Fund raising R1bn and Sirius Real Estate raised £150m from SA and offshore investors.