SA real estate investment trusts (Reits) entered 2025 on a tough note, despite strong gains last year.
The sector was rattled by US President Donald Trump’s tariff threats against China, Canada, and Mexico, spiking global inflation concerns.
With inflation set to stay high, Reits and other interest-sensitive sectors face a rocky road ahead. January’s weak share price performance reflected growing investor unease.
The head of listed property and portfolio manager at Merchant West Investments, as well as the compiler of the SA Reit Association’s monthly Chart Book, Ian Anderson, predicts that the sector is seeing distributable income growth for the first time in three years.
“However, interest rates are unlikely to fall as swiftly or as significantly as previously anticipated, while the signing of the Expropriation Bill into law by President Cyril Ramaphosa has added uncertainty for some investors. The threat of additional load-shedding in February is also likely to dampen investor sentiment and, in this environment,” Anderson said.
Anderson noted that SA Reits may face challenges in maintaining the strong performance seen last year in the short term.
In its first policy meeting of the year, the US Federal Reserve kept interest rates unchanged for the first time since July 2024, driving higher bond yields in January. Meanwhile, the SA Reserve Bank cut rates by 25 basis points, though the decision was not unanimous. Future cuts will depend on global inflation and the impact of President Trump’s tariffs.
“Against this backdrop, SA Reits saw a 3.6% decline in January, underperforming the broader equity market, which rose 2.3%, driven by strong returns from the precious metals sector and the bond market, which posted a modest 0.4% gain due to attractive real yields in SA,” Anderson said.
Anderson further said that it was not unusual for SA Reits to begin the year with negative returns. Since 2020, they’ve only posted a positive return in January once — in 2024. This year, just three companies saw positive returns, with Texton Property Fund leading the way at 12.5%. Accelerate Property Fund (+2.1%) and Spear Reit (+0.9%) also experienced modest gains
Over the course of 2024, SA Reits outperformed all other asset classes, delivering a 35% return, far surpassing the broader equity market, which gained 13%, and the bond market, which saw a 17% return.
Last week, the association expressed concern over the limited exposure to SA Reits despite their strong long-term performance and low correlation with other assets.
In the report released last week, the association made a strong case for investors to increase their exposure to Reits, particularly within multi-asset-class portfolios with long-term strategic objectives, as property is fundamentally a long-term investment.
“The defensive qualities of SA Reits — such as their inflation protection and mandatory income distributions — make them essential for building resilient portfolios. By harnessing the unique advantages of Reits, SA investors can enhance diversification, stability and long-term growth,” said SA Reit Association research committee chair and MD of Vukile Property Fund SA, Itumeleng Mothibeli.
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