South Africa’s Real Estate Investment Trust (REIT) sector is showing signs of resilience amid a turbulent global backdrop, posting a 1.2% recovery in February.
Image: File picture: James White
South Africa’s Real Estate Investment Trust (REIT) sector is showing signs of resilience amid a turbulent global backdrop, posting a 1.2% recovery in February after a shaky start to the year.
"This positive return outpaced the broader equity market, which remained flat at 0.0%, and the bond market, which posted a modest 0.1% gain. Despite this bounce-back, the sector has still posted a 2.5% decline year-to-date, underperforming both the equity and bond markets," the SA REIT Association said on Tuesday referring to its monthly Chart Book.
Total return indexes of SA Reits against the All Share and All Bond.
Image: SA REIT Association’s monthly Chart Book
The overall investment outlook for the sector remains positive for 2025, according to Ian Anderson, the head of listed property and a portfolio manager at Merchant West Investments, who is the compiler of the SA REIT Association’s monthly Chart Book, and Richard Henwood, a portfolio Manager at Merchant West Investments.
"Investors can expect a modest improvement in property fundamentals along with the possibility of lower interest rates. This outlook is supported by recent developments, such as a 25 basis point rate cut by the South African Reserve Bank, the formation of a Government of National Unity, a reduction in loadshedding and the introduction of the two-pot retirement system at the end of 2024," they said.
With these factors in mind, Anderson and Henwood said the sector is projected to see average growth in distributable income of 3% to 5% - a positive turnaround after three years of stagnation. However, they caution that the market may face increased volatility due to global geopolitical tensions, particularly in relation to US President Donald Trump’s ongoing threats of higher tariffs, which could fuel inflation and impact economic growth globally.
Still, global uncertainties cast a long shadow. “The market may face in
Market Capitalisation of publicaly traded SA REITs in February 2025.
Image: SA REIT Association’s monthly Chart Book
creased volatility due to global geopolitical tensions,” they warn, singling out US President Donald Trump’s tariff threats against China, Mexico, and Canada. Such moves could stoke inflation, complicating rate cuts by central banks in 2025. Weaker US economic data from late February has only deepened concerns about global growth, with ripple effects felt in Johannesburg.
Domestically, the delay of the 2025 Budget Speech - after cabinet rejected a proposed 2% VAT hike - has added to the uncertainty.
The REIT sector’s 12-month performance to February 28, 2025 saw some standout performers such as Texton at 69.8% Attacq at 43.7%, Fairvest B at 45.5% and Hyprop at 43.5%. On the flip side, Accelerate slumped 16.1%.
"Overall, while the South African REIT sector continues to face challenges, particularly from global uncertainties, the sector's fundamentals appear poised for gradual improvement," they said.
BUSINESS REPORT
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