The SA listed property index is up more than 26% since the beginning of the year, adding billions of rand in value as confidence returns to the sector after a few tough years, including the devastation of the Covid-19 pandemic.
The sector, which accounts for assets worth more than R500bn, has faced many challenges, leading to structural shifts in the office space market.
As hybrid work arrangements have become more common, many businesses have scaled back their office space needs. However, there are signs of recovery as research from the SA Property Owners Association (Sapoa) shows overall office vacancy at the end of the third quarter stood at 13.6%, marking a decrease of 60 basis points from the previous quarter.
According to industry body SA Reit, listed property has outperformed bonds, equities, and cash so far this year. Given the recent interest rate cut and likelihood of more, the sector is poised for further growth, it added.
Independent property analyst Keillen Ndlovu said: “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.”
SA’s largest commercial property group, Growthpoint, which oversees 345 logistics, retail, office, and industrial properties valued at R66bn, has seen its share price gain more than 21% in 2024.
Fortress is the best performer in the index, but that has come off a low base as the group tussled with shareholders in its attempts to collapse its complicated dual-share structure. The group finally succeeded in doing in February. It also resumed paying dividends after the restructure, with its share price up 190% so far this year.
Hyprop, with a market cap of R17bn, is up almost 48% in 2024. The group, which owns large retail centres including Rosebank Mall, Hyde Park Corner and Table Bay Mall, recently sold properties in Nigeria and Ghana in a move to strengthen its balance sheet and protect its better performers in SA.
The sale, completed in an all share deal with Lango Real Estate, will see the company reduce its exposure to weakened Nigerian naira, the devaluation of which over the past few years has seen asset values in the country tumble measured in dollars.
Attacq, Hyprop’s partner in the Lango deal, sold a 30% stake in Waterfall City to the Government Employees Pension Fund for R2.7bn a year ago and used the money to pay down debt. Its share price is up more than 70% since that deal and 46% this year.
“Over the past few years, the sector has seen a decline in equity raised. After raising as much as R69.4bn in 2014, SA listed property raised R7.4bn in 2023. However, there has been decent activity so far this year with Vukile Property Fund raising R1bn and Sirius Real Estate £150m from SA and offshore investors,” SA Reit said.
Ndlovu said even though Reit earnings had been under pressure, he expected it to “return to positive territory in 2025 and to inflation-beating levels in 2026”.
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