South Africa’s real estate investment trusts surge as liquidity returns, dividends accelerate and funding costs ease

South Africa’s real estate investment trusts (REITs) staged a decisive rally in October. The SA REIT Index returned 10.8% for the month, outpacing equities at 1.6% and bonds at 2.6%. Year to date to 31 October 2025, the sector is up 26.4% as earnings momentum, firmer sentiment and lower funding costs converge.

“October marked a turning point. Investors rotated back into REITs at scale, pricing in faster dividend growth and a healthier cost of capital,” says Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments and compiler of the monthly SA REIT Chart Book. He notes that trading activity was intense with just under R14 billion changing hands in the month, excluding Vukile’s R2.65 billion accelerated bookbuild placed at a small discount to its net asset value (NAV). “This is what renewed confidence looks like. Balance sheets are stronger, distributions are accelerating and selective external growth is back on the table.”

Published by the SA REIT Association and compiled by Anderson, the SA REIT Chart Book distils sector performance, valuation, yield and capital markets activity into clear visual intelligence along with informed commentary for investors and media. The latest October issue was released on 6 November 2025. (Benchmark and methodology: SA REIT Index total return, FTSE/JSE indices, end-October 2025.)

Highlights from the SA REIT Chart Book October 2025

• Sector total return: +10.8% month-on-month
• Equities: +1.6% month on month
• Bonds: +2.6% month on month
• SA REIT year to date: +26.4%
• Broad participation led by counters such as Growthpoint, Hyprop, Redefine, Resilient, Spear and Vukile

Market leadership was underpinned by improving operating updates, resilient occupancy and measurable relief on interest expense. Several REITs reached or approached all-time highs, while bookbuild activity at pricing close to reported NAV signals a reopening of the equity window for quality portfolios.

What drove the surge

Anderson attributes October’s strong advance to a combination of softer long bond yields, visible distributable income growth and narrowing discounts to NAV. “On a forward view we see sector dividends compounding in the high single digits, with a current forward yield near 7.5%. If bond yields remain range bound, double digit total returns over the medium term are achievable,” he says.

Context and correlation

The sector’s risk / return profile continues to differentiate against local equities and bonds, with five-year correlation metrics and rolling return components reinforcing the diversification role of REITs in South African multi-asset portfolios. The SA REIT Chart Book details this across total return indices, yield differentials and rolling distribution growth.

With investor demand returning and the cost of both debt and equity improving, selectively accretive acquisitions, redevelopments and new developments are set to feature again. “After October’s rerating, the heavy lifting shifts back to earnings and cash flows. That is a constructive handover for a sector that has rebuilt its fundamentals,” Anderson says.

Company updates

Several noteworthy company developments during October reflect renewed market activity and investor confidence across South Africa’s real estate investment trusts.

Accelerate Property Fund led the pack after shareholders voted overwhelmingly against the re-election of founder Michael Georgiou to the board, with more than 97% opposing the motion. The stock surged almost 18% following the decision, making it the top-performing REIT for the month.

Emira Property Fund expanded its strategic position in SA Corporate Real Estate, acquiring an additional 130 million shares to take its holding to 229.6 million shares, equivalent to 8.7% of the total shares in issue. Controlled by the iGroup, which owns just over 64% of Emira, the move underscores continued consolidation and capital recycling activity in the sector.

Fairvest announced two earnings-accretive acquisitions, namely Jozini Mall and Tugela Ferry Mall in KwaZulu-Natal, for a combined R674 million at an attractive initial yield of 10.17%. SA Corporate added to this momentum by acquiring the Parks Lifestyle Apartments at Riversands, a 1 960-unit residential complex near Steyn City, for R1.67 billion, while simultaneously disposing of Bluff Towers Shopping Centre for R544.6 million.

Meanwhile, Safari Investments unveiled plans to delist following a firm intention by Heriot REIT to acquire all remaining shares at R8 per share. The proposed deal, once approved, will see Safari become a wholly owned subsidiary of Heriot REIT, enabling a shift toward a development-led growth strategy despite reduced near-term dividends.

Across the board, results from Equites Property Fund and Spear REIT were well received by investors, reflecting improving property fundamentals and the positive impact of lower borrowing costs on distributable earnings, key drivers behind October’s strong sector-wide performance.

The SA REIT Association Chart Books are available for download here.

SA REIT Conference 2026

The SA REIT Association’s biennial conference, proudly sponsored by Nedbank Corporate and Investment Banking’s Property Finance division, takes place on 12 February 2026 at The Houghton Hotel, Johannesburg. The keynote address, “Global REIT Dynamics: Innovation, Influence and Opportunity”, will be delivered by Peter Verwer, Executive Chairman of Futurefy. The agenda will examine capital access, innovation, local government risk, policy and the renewed relevance of REITs in the real economy.

Register here.

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Sector slips 0.3% despite stronger bonds and equities while dividend growth momentum continues

South African Real Estate Investment Trusts (REITs) recorded a marginal 0.3% decline in September, underperforming both equities (+6.6%) and bonds (+3.4%), according to the SA REIT Association’s September 2025 Chart Book. Despite this pause, the sector’s year-to-date return remains at 14%, broadly in line with the bond market, though well behind the equity market’s strong 31.7% advance.

“The subdued performance in September is notable given the sharp decline in long bond yields, a buoyant equity market and further signs that distributable earnings growth is accelerating into 2026,” says Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments and compiler of the Chart Book.

He adds: “Dividends across the sector are growing by close to 10% year-on-year, yet investors remain cautious about whether this acceleration will be sustained. However, the evidence increasingly supports ongoing double-digit dividend growth into 2026.”

September by the numbers

• SA REIT sector: -0.3% in September, +14% year-to-date
• Equities: +6.6% in September, +31.7% year-to-date
• Bonds: +3.4% in September, +14.0% year-to-date
• Dividends: Sector-wide growth of close to 10% year-on-year
• New equity raised in 2025: Just under R4 billion

Results momentum builds across the sector

September saw several key companies release results to end-June 2025.

Growthpoint surprised on the upside with distributable income up 3.1%. Despite disposing of 24 properties worth R2.3 billion and reducing its gross lettable area by over 5%, net property income in its core South African portfolio rose 5%. Management raised the dividend payout ratio to 85%, lifting the dividend 6.1%, well above market consensus. Guidance for FY26 remains conservative while dividends are still expected to grow 6% to 8%.

Fortress delivered a 7.1% dividend increase in FY25. Supported by improving property fundamentals, a robust development pipeline and lower interest rates, management forecasts further growth of 6% to 7.5% in FY26.

Hyprop reported strong operating performance in both South Africa and Eastern Europe. Its FY25 dividend rose 9.9%, with guidance for distributable income growth of 10% to 12% in FY26. The upbeat tone from management represents a shift from their cautious outlook of recent years.

Beyond the large caps, Attacq, Heriot, SA Corporate, Safari and Texton also released better-than-expected results, while Fairvest and Vukile issued positive trading updates. Dipula successfully raised R559 million through an accelerated bookbuild in early September, funding its acquisition of Protea Gardens Mall in Soweto alongside four additional smaller assets.

Investor sentiment shows signs of recovery

Investor confidence in the listed property sector continues to improve. Roughly R4 billion of new equity has already been raised in 2025. While this is still well below the R30 billion annual average raised between 2015 and 2017, it represents a significant rebound from the R8 billion of net new equity raised across the entire period between late 2019 and early 2025.

“This is increasingly a story of returning investor confidence,” indicates Anderson. “The ability to raise capital again at competitive levels, alongside sharply lower borrowing costs, provides the sector with the resources to return to external growth. Acquisitions, redevelopments and greenfield developments are once again feasible, with the potential to accelerate income and dividend growth.”

For example, Growthpoint Healthcare Property Holdings, managed by Growthpoint Investment Partners, the fund management business of Growthpoint, has recently announced that it has entered into an agreement to acquire the properties and operations of Auria Senior Living, a developer, owner and operator of senior living communities in South Africa.

The sector’s transformation over the past five years has been marked by defensive measures: Balance sheet management, recycling capital and optimising portfolios. With these foundations now stronger, listed property is positioned to deliver earnings growth above inflation and renewed capital appreciation.

Outlook: Poised for a new growth phase

Anderson notes that while short-term prices can move on sentiment, interest rates and liquidity, long-term capital growth ultimately depends on sustainable earnings and cash flow.

“South Africa’s REIT sector is entering a period of inflation-beating earnings growth, which is not yet fully reflected in most share prices. This creates an opportunity for investors who recognise the sector’s improving fundamentals.”

The positive outlook for the sector was echoed at the SAPOA Convention 2025 at Sun City on 2 October during the panel Listed property – the real economy’s barometer. Anderson opened the discussion with an overview on resilience and growth prospects in the sector. He was joined by Kundayi Munzara, Executive Director and Portfolio Manager at Sesfikile Capital, Pranita Daya, Equity Analyst and Assistant Portfolio Manager at Truffle Asset Management and Andrew Wooler, Chief Executive Officer of Burstone. Moderated by Peter Clark, Founder of REdimension Capital, the discussion highlighted fundamentals, discipline and the role of direct property as a true barometer of the economy. The panel confirmed that listed property is regaining relevance as a clear indicator of South Africa’s real economy.

The full September 2025 Chart Book is available for download on the SA REIT Association website.

SA REIT Conference 2026

The SA REIT Association’s biennial conference, proudly sponsored by Nedbank Corporate and Investment Banking’s Property Finance division, will take place on 12 February 2026 at The Houghton Hotel, Johannesburg.

This flagship event will convene REIT executives, investors, asset managers, policymakers and market experts to engage on the most pressing forces shaping the future of listed real estate. Topics will include global market volatility, access to capital, innovation, local government risks and the policy environment. With a focus on sector credibility and long-term investor relevance, the agenda promises strategic insight and practical direction.

A highlight will be the keynote address by Peter Verwer, Executive Chairman of Futurefy, titled Global REIT Dynamics: Innovation, Influence and Opportunity. He will explore how REITs worldwide are adapting to investor demands, digital transformation, sustainability imperatives and links to infrastructure and nation building. His perspective comes at a pivotal moment, following the relaunch of the Global REIT Alliance in Stockholm in September 2025.

Originally established in 2006 under the banner of the Real Estate Equity Securitization Alliance (REESA), the alliance has been revitalised under its new name to strengthen international collaboration, knowledge-sharing and industry advocacy. The SA REIT Association is a member of the Alliance.

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According to the SA REIT Association December and January Chart Books, the sector is expected to deliver strong income returns of c.8%-9%.

Itumeleng Mothibeli, Chairperson of the SA REIT Research Committee and Managing Director of Vukile Property Fund Southern Africa commented:

“With the economic recovery, lower interest rates and robust demand for commercial property—particularly in the retail,  industrial and logistics sectors – we anticipate growth in the REIT sector this year. Our members are consistently reporting improvements in property fundamentals and the quality of earnings.”

“Township, urban and rural malls will continue to show resilience, while demand for logistics and warehousing space will remain strong. In the office sector, vacancies are falling as demand increases for smaller, high-quality spaces with features like co-working spaces, wellness facilities and smart technology are a draw card for tenants.”

Mothibeli said the defensive qualities of South African REITs such as their inflation protection, mandatory income distributions, liquidity and diversification advantages make them essential for building resilient portfolios. The predictability of real estate leases and rental income gives REITs a defensive edge, enabling more accurate earnings forecasts and lower share price volatility. REIT dividends are known to hedge against inflation, as asset values and rental rates often rise ahead of inflation.

“The cumulative 75-basis point interest rate cut will support sector growth, reduce borrowing and debt repayment costs for REITs, increase property values and returns for investors and boost distributions,” said Mothibeli.  

Despite the economy’s prolonged stagnation in 2024, Nedbank forecasts modest growth of 1.4% in 2025 and 1.8% in 2026. However, the bank expects fewer interest rates this year.

Nicky Weimar, Nedbank Group Economist commented: “Growth will be driven mainly by firmer consumer spending, supported by rising real incomes, subdued inflation, modestly lower interest rates and the withdrawals of contractional savings through the two-pot retirement fund system.

“Commercial property mortgages are recovering while home loans continue to slow. Nedbank expected both the commercial and residential property markets to improve moderately as the year progresses.”

Weimar stressed that the rapidly changing global landscape would probably deliver stickier global inflation and fewer US interest rate cuts, pointing to high-for-longer risk-free rates and continued US dollar strength. Against this backdrop, the South African Reserve Bank is likely to remain cautious.

Given upside risks to the local inflation outlook from a vulnerable rand, elevated US interest rates and the threat of global trade war, the current rate-cutting cycle is likely to be shallow. Nedbank forecasts only one more rate cut of 25 basis points in July. Consequently, monetary policy easing is unlikely to provide a significant boost to the property market. Instead, moderately faster economic growth in response to easing structural constraints and stronger consumer demand will support a reasonable recovery in the property market, said Weimar.

Gary Garrett, Managing Executive of Property Finance at Nedbank CIB commented: “We saw a significant increase in activity in the sector in the second half of 2024 which we attribute to the stability created by the Government of National Unity (GNU) as well as real evidence of interest rate cuts. We believe that this momentum will continue in 2025 should current economic conditions hold.”

The listed property sector outperformed other asset classes, including equities and bonds in 2024, further highlighting the positive sentiment and investor confidence in the sector, Garrett added.

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Since the early 2000s, REITs have experienced significant growth – they now represent 4.9% of the JSE All Share Index (ALSI), 10.2% of the JSE Mid Cap Index and 26.0% of the JSE Small Cap Index.

Naeem Tilly, a member of the SA REIT Association Research Committee and Portfolio Manager & Head of Research at Sesfikile Capital commented:

“REITs remain underrepresented in local balanced funds, with allocations averaging just 2.1% at the end of the third quarter of 2024. This is despite their potential to enhance risk-adjusted returns, thanks to their low correlation with traditional asset classes like equities and bonds.”

Optimal allocations to property in local portfolios is 23%.

Research from the SA REIT Association entitled: REITs in a multi-asset class portfolio, indicates that the recent increase in offshore limits under Regulation 28 has led to a substantial reallocation of assets towards foreign bonds and equities.

The Alexforbes Manager Watch survey shows an average allocation of 4.1% since 2018 and 3.1% at the end of 2023 for a global balanced fund.

“Combining assets with low performance correlation allows investors to reduce portfolio risk while preserving return potential, a key principle of effective portfolio optimisation,” said Tilly.

Tilly said REITs are an asset class that offers significant diversification benefits. Since 1976, global REITs have shown imperfect performance correlations with both the broader equity market (0.42) and bonds (0.37), which are typically considered core holdings in a diversified portfolio. A perfect positive correlation is +1, while zero correlation indicates no relationship. “In the past decade, the correlation with local bonds has increased to 0.49.”

REITs stand out due to several key features. They are required to distribute at least 75% of taxable income as dividends, which historically make up 80% of their total returns and help reduce volatility during market stress. The predictability of real estate leases and rental income gives REITs a defensive edge, enabling more accurate earnings forecasts and lower share price volatility. Additionally, REIT dividends are protected from inflation, unlike many bonds, as asset values and rental rates often rise with inflation.

Itumeleng Mothibeli, Chairperson of the SA REIT Association Research Committee and Managing Director of Vukile Property Fund Southern Africa, said these findings align with global insights from Oxford Economics, which highlight the complementary roles of listed and direct real estate investments. Listed REITs, with their liquidity and diversification advantages, are particularly well-suited for higher-risk portfolios, while direct real estate offers stable income and consistent performance.

“The defensive qualities of South African REITs—such as their inflation protection and mandatory income distributions—make them essential for building resilient portfolios. By harnessing the unique advantages of REITs, South African investors can enhance diversification, stability and long-term growth,” said Mothibeli.

As global economic uncertainties persist—driven by fluctuating interest rates and geopolitical tensions—reassessing strategic allocations to REITs offers significant potential for both local and international investors, added Mothibeli.

Download the REITs in a multi-asset class portfolio report here: https://bit.ly/3EobfPK

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The REIT sector, which made a strong recovery in October 2024, has outpaced other asset classes, delivering a 34% return year-to-date. In comparison, the broader equity market has returned 15.9%, while South African bonds have gained 16.7%.

Key factors contributing to this outperformance include the formation of the Government of National Unity (GNU) and a stable power supply, both of which have positively impacted the sector and driven improvements in property fundamentals.

Estienne De Klerk, Chairperson of the SA REIT Association and Growthpoint Properties South African CEO commented:

“In 2024, we have seen notable improvements in key property performance indicators, signalling strong investment potential and supporting expectations for future net rental growth. The anticipation of additional interest rate cuts has further bolstered investor confidence and sentiment, creating a positive outlook for the sector as we head into 2025.

However, the cumulative 50 basis point rate cut so far is not a panacea –  it is essential for stimulating market demand and activity, as well as supporting growth in company earnings. While not immediate, additional rate cuts will support REITs in raising capital, refinancing maturing loans, and acquiring new assets.”

To ensure long-term liquidity and a solid balance sheet, REITs have remained focused on strategically disposing of non-core assets, optimising their portfolios to enhance quality and implementing proactive asset management strategies to increase property values, he said.

De Klerk noted that sentiment in the office sector has strengthened, evidenced by a surge in space inquiries and a decline in vacancies. In coastal regions, demand is now outpacing supply in certain areas as more people return to the office. However, oversupply still exists in Gauteng.

Meanwhile, the retail sector is growing. As consumer sentiment improves, De Klerk expects to see better trading densities and rental growth in 2025. The industrial property sector continues to outperform, driven by strong demand, limited supply and rising construction costs, all of which are fuelling rental growth—this trend is set to continue into 2025.

Sustainability

Shifts in how and where tenants occupy commercial space has resulted in increased demand for sustainable buildings, new and high-quality refurbished buildings across the industrial, retail and office sectors.

REITs have made substantial investments in solar power and water supply infrastructure, continually enhancing their buildings to reduce carbon footprints while offering occupiers high-quality, sustainable spaces to operate from.

For many, sustainability is embedded in their organisational DNA and core business strategies for long-term benefits.

“In November, we launched the SAREIT Sustainability Disclosure Guide to set clear sustainability standards and best practices for South Africa’s real estate sector. We are confident that this initiative will play a pivotal role in supporting our members on their sustainability journeys,” said Joanne Solomon, CEO of SA REIT.

As a key player in addressing environmental, social and governance (ESG) challenges, the guide will provide strategic direction for the industry, helping to shape a future where sustainable practices are seamlessly integrated into business strategies, driving both resilience and long-term value,” she added.

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This guide is a valuable resource for SA REIT members and property organisations starting their sustainability reporting. It provides key information to improve their reports and outlines a framework of recommendations for sustainability and climate-related disclosures, aligning with international standards in the South African property sector and the global sustainability landscape.

Joanne Solomon, Chief Executive Officer of SA REIT Association comments:

“As industry partners, we are proud to launch the inaugural SA REIT Sustainability Disclosure Guide, marking a significant advancement in fostering a unified approach to sustainability within the South African real estate sector.

The property sector plays a crucial role in tackling environmental, social, and governance (ESG) challenges. Our goal is to guide the industry toward a future where sustainable practices are seamlessly integrated into business strategies, enhancing both resilience and value.”

Sustainability has become a key priority for businesses, with capital markets increasingly evaluating performance based on ESG metrics in their investment decisions. This trend is supported by compelling evidence linking strong ESG performance to an organisation’s ability to secure long-term competitive and financial advantages.

Furthermore, sustainability reporting offers investors valuable insights into a company’s long-term viability, risk management, and growth potential. This transparency empowers investors to make informed decisions that align with their values and financial goals.

“Meaningful sustainability disclosure is essential for attracting financial capital, enhancing accountability, improving business performance, and fostering a resilient property sector.”

The guide aims to enhance the reliability, consistency, and comparability of ESG data among South African REITs, promoting objectivity, facilitating analysis, improving valuations, supporting benchmarking, and encouraging cross-organisational comparisons, said Solomon.

Gary Garrett, Managing Executive of Property Finance: Nedbank CIB commented:

“As a purpose led organisation, we aspire to be a key participant in promoting a more sustainable future for the real estate sector. We are intentional about sustainability and about contributing positively to the communities in which we operate.”

The SA REIT Sustainability Disclosure Guide highlights the significance of accurate and reliable ESG reporting, aligning with global best practices and standards. These include the Global Reporting Initiative, the Sustainability Accounting Standards Board, and the Task Force on Climate-related Financial Disclosures.

Garrett said the practices outlined in the guide foster transparency, enhance stakeholder trust, and promote sustainable growth in the property market.

Solomon said the guide aligns with the voluntary JSE Sustainability and Climate Change Disclosure Guidance of 2022 and global best practices, specifically for the South African property sector. SA REIT recommends using this guide alongside the JSE guidance which serves as its foundation.

Many recommendations in these frameworks are not industry-specific and often overlook the unique challenges faced by property owners in South Africa. For instance, an international decarbonisation disclosure framework may not account for local municipality restrictions on electricity wheeling or the lengthy process of obtaining water-use licenses.

“This guide will assist issuers and investors in the South African property sector by standardising key sustainability concepts and their reporting. While it serves as a valuable voluntary tool, its application is not mandatory,” she added.

Download the SAREIT Sustainability Disclosure Guide here or email info@sareit.co.za for more information.

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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

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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.

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The average payout ratio by South African REITs has declined from 93.5% in FY19 to 75.6% in FY23. Payout ratios are expected to increase to about 78.4% in FY24.

This is according to the Nedbank Corporate and Investment Banking (CIB) research commissioned by the Research Committee of the SA REIT Association on the payout ratios of JSE-listed REITs in a global context.

Ridwaan Loonat, Senior Equity Research Analyst at Nedbank CIB, commented:

“We forecast an increase in payout ratios over the medium term as current retained earnings are used to reduce debt and strengthen balance sheets with company earnings benefitting from potentially lower interest rates.”

Joanne Solomon, CEO of SA REIT Association, commented: “We welcome the research findings which affirm that SA REITs are aligned to global peers.

“As an organisation, we highly value feedback from our members, investors, and fund managers. This input helps us enhance our performance and position the sector as an attractive investment opportunity both locally and internationally.”

A payout ratio is the amount of earnings the company pays to shareholders in the form of a dividend. For REITs, a payout ratio is expressed as a percentage of distributable earnings. A large contribution to the total return of listed property companies is its income, which is dividends, said Loonat.

The JSE requires listed REITs to distribute at least 75% of taxable earnings to shareholders annually, subject to the solvency and liquidity requirements as per the Companies Act.

Loonat said that for SA REITs, earnings that are retained would be subject to taxation, commonly known as tax leakage. If a company can minimise its tax leakage through assessed losses, it can retain more income. If a property company is not a REIT, then that company is not obliged to declare a dividend, and it would be up to the Board to decide if and when it would declare a dividend, if at all.

According to the research findings, the global average payout ratio is currently 76%, slightly lower than its 5-year average of 79%.

Distributions in the Asia-Pacific (APAC) region were less affected by the COVID-19 pandemic compared to South Africa and the US, which saw payout ratios decline 18% and 15%, respectively. European payout ratios remain below peers.

Estienne De Klerk, Chairperson of the SA REIT Association and Growthpoint Properties South African CEO commented:

“It is encouraging that the SA payout ratio aligns with global peers. While it is important to consider regional differences in REIT distribution rules and tax systems, this alignment showcases the strength and competitiveness of the SA market.”

Additionally, the source of income like ordinary income, capital gains, and return of capital must be considered when determining payout ratios, according to the research.

The research shows that in the US and UK, REIT distribution regulation requires that at least 90% of taxable profits are paid as dividends, while in Belgium, the rule is at least 80% of net profits.

In Germany, the distribution rule is 90% of net income, while in France, three rules apply – 95% of tax-exempt profits from qualifying leasing activities, 70% of the capital gains and 100% of dividends received from subsidiaries that have elected for the Société d’Investissement Immobilier Cotée (SIIC) regime. A SIIC status is a special arrangement provided by a French law passed in 2002 giving tax benefits to publicly listed companies.

SA REIT is working on several valuable research pieces that will be released in the future.

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Following the success of its previous conferences, and after a break due to COVID-19, the SAREIT Conference is ready to roll out unmatched opportunities once again to hear from REIT executives first-hand, learn from leaders in the real estate investment community, and take part in candid conversations with peers and industry shapers regarding local and international trends shaping our industry.

The conference attracts executives and senior management representatives, property and retail analysts, institutional investors, banks, entrepreneurs, corporate sponsors, and accounting and legal entities operating in the dynamic property world.
Sponsored by Nedbank CIB, the conference will take place on 3 February 2022 at Houghton Hotel, Lloys Ellis Avenue, Houghton Estate, Johannesburg, 2198. In addition, an on-line platform will be provided for virtual delegates.

“These are unprecedented times, and this conference provides the perfect opportunity to reflect on our experiences and share views with our peers across the sector. We are delighted to be part of the conference again as we all continue to build this critical segment of the economy.” says Gary Garrett, Managing Executive of Property Finance at Nedbank CIB”.

Industry thought leaders will discuss pertinent issues for investors and capital providers, including the policy and the business environment impacting REITs, ESG, advocacy and emerging trends for the sector locally and abroad.

Much has changed since the last time South Africa’s REIT industry and its partners gathered for our last conference. The intervening two years will go down as the most challenging of years in recent times, marked by enormous uncertainty from a human and social perspective, requiring unprecedented adjustments to the way we live, work and play.

“With this in mind, the SA REIT Conference 2022 is specifically designed to highlight the different and diverging views about our sector. It’s all about authentic, critical debate,” says Taverna-Turisan, SA REIT Association’s Marketing Committee Chairman.

The programme provides direct access to the most influential players in the local and international REIT sector. Through high-profile keynote speakers and several panel discussions, the programme will offer multifaceted perspectives on REITs’ latest pressures and innovations.

CEO of the SA REIT Association, Joanne Solomon, says: “While the pandemic exacerbated South Africa’s underlying economic weakness, and much rests on an improvement in economic conditions, it is encouraging to witness how SA’s REITs – which are a key contributor across the whole South African economic value chain – have demonstrated a commitment to the country and fully assume their role in ensuring that we rebuild our future together.”

The SA REIT Conference 2022 is a significant opportunity to examine the forces shaping the sector and consider the contribution it is being compelled to make in the broader issues affecting the country.

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