Growthpoint Properties said its SA retail and industrial portfolios continue to recover despite a challenging macroeconomic environment, while the office portfolio has stabilised.
For the three months ended September, vacancies declined to 10.2% from slightly from 10.3% as the group let new space of more than 150,000m², the equivalent of a mall the size of Sandton City, the JSE-listed real investment trust said in a trading update on Thursday.
It also renewed leases on about 240,000m², bringing the total amount of space let in the period to over 390,000m². Retail and industrial vacancies have returned to pre-Covid-19 levels, with the renewal rate at 66.8%, Growthpoint said in a trading update on Thursday.
“Given local and global uncertainty coupled with high interest rates and inflation we still expect muted distributable income per share growth for FY2023,” it added.
Growthpoint — which owns a property portfolio spanning Africa, Australia, the UK and Eastern Europe, and a 50% stake in the V&A Waterfront in Cape Town — said the average lease period achieved on renewals increased to 4 years in the review period from 3.2 years in the 2022 financial year. Escalations on renewals increased to 6.8% from 6.4%.
Though vacancies overall are declining, a sluggish macro-economic environment is hampering the industrial sector, the company said. Rising inflation and the effects of this on construction costs have slowed new supply and increased demand for existing industrial stock, it added.
Vacancies fell to 4.3% from 5.7%, concentrated in Gauteng, while in KwaZulu-Natal and the Western Cape vacancies are at 2% on average.
The retail portfolio is experiencing a rebound in sales and rebased rentals, resulting in improved cost of occupation. Trading densities grew by 9.4% in the quarter, with increased leasing activity “driven by recent retailer merger and acquisition activity, store optimisation, rightsizing, the introduction of new brands and store upgrades”.
“We continue to see rent reversions as leases expire, and these are mainly as a result of the conclusion of Ster-Kinekor’s business rescue process.”
Growthpoint said reversions weakened to -15.0% from -13.6%. These would have been -8.1%, excluding Ster-Kinekor and two other significant renewals of 6,500m². Arrears decreased from R68.3m to R61.7m during the period.
Retail sales, footfall and the hospitality sector benefited from the rebound in international tourism and the return of conferences, sporting and other events at the V&A Waterfront, it added.
The precinct recorded a 0.6% vacancy rate with unusually high demand for office space.
“We are optimistic that the coming summer season will be the boost required to see the V&A Waterfront make a full recovery,” the group said.
Focus on debt
Growthpoint said strengthening its balance sheet and liquidity position remain a priority.
At the end of September, total nominal SA debt was R40.2bn compared with R39.2bn during the 2022 financial year. About R840m of the increase resulted from foreign currency movements on the group’s Eurobond and IFC loan, as well as a R210m drawdown of debt to fund development for the Growthpoint Student Accommodation Reit.
Growthpoint sold and transferred 14 noncore properties for R748.2m, at a R92.6m profit to book value. It also concluded the sale of 13 additional properties for R668m at R40.4m profit to book value that awaiting transfer.
Group CEO Norbert Sasse has announced his intention to retire at the end of 2024. His successor will be appointed during the first half of 2024 to ensure an orderly handover.
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