Johannesburg’s multifamily rental sector is shedding its niche status as institutional investors increasingly target portfolios created from converted office buildings.
Two recent transactions with a combined value of R2.6bn underscore the shift: Africrest Properties, one of the city’s largest office-to-residential conversion specialists, sold a portfolio of about 1,600 apartments for more than R1bn; and JSE-listed SA Corporate Real Estate bought The Parks Lifestyle Apartments Estate from Century Property Developments, trading as Houss, for more than R1.6bn.
Also known as the large-scale residential rental property market, the multifamily sector is claiming its place in the local real estate landscape. Globally, such assets are already recognised as a mature and institutional-grade asset class.
Africrest Properties recently sold three residential estates in Sunninghill— The Alpha, The Apollo and The Atlas — which had all been converted from offices into residential apartments.
“We still own 6,000 apartments. Over the next 12 months, we plan to grow our portfolio to 10,000 units, as we currently have more than 4,000 apartments in development. On top of that, we have several exciting new deals in the pipeline,” said Africrest Properties director Justin Blend.
The deals reflect growing appetite from listed funds and pension investors for large-scale, professionally managed rental assets that deliver stable, predictable income.
“The South African multifamily rental market has achieved institutional legitimacy. The stability of diversified rental income and strong housing demand makes it an essential part of any institutional property portfolio,” Blend said.
The office-to-residential wave gained momentum during and after the Covid-19 pandemic, when high office vacancies left landlords exposed. Developers seized the opportunity, converting underperforming offices into rental housing that attracts residents to central nodes such as Sandton — areas once out of reach for many living in peripheral areas. The shift not only alleviates transport costs for those working in Sandton but also eases traffic congestion.
The momentum shows no signs of slowing. Earlier this month, Pareto — backed by the Government Employees Pension Fund (GEPF) in association with Divercity — broke ground on an R850m conversion of Menlyn Office Park into residential units. The project is Pareto’s first move into residential property after years of focusing primarily on retail assets, including Mimosa Mall in Bloemfontein.
During the year, Absa joined the South African Multifamily Residential Rental Association (Samrra), the country’s representative body for the segment, shortly after Nedbank Corporate and Investment Banking became a member.
Africrest is also a member of Samrra, which consists of 13 members who collectively represent more than R40bn in property assets and a portfolio of more than 75,000 residential units across the country.
Africrest Properties and Divercity Property Group produced more than 4,500 multi-family apartments last year alone — more than the entire output of Australia — as middle-class South Africans increasingly seek affordable, well-located rental housing, according to the Horizon report compiled by London-based real estate consultancy Knight Frank.
For the first quarter of this year the association’s members reported 95.8% occupancy rates, bad debt of less than 1% and demand far outstripping supply.
“The multifamily offering has gained momentum, buoyed by increasing demand for quality, affordable, centrally located and well-managed rental housing. Institutional investors are taking note,” said Amelia Dieperink, executive head of residential, real estate finance, investment banking”
“According to Stats SA, 4.5-million households — or 23% of the national population — are renting. Of those, 15% (about 685,000 households) live in apartment blocks, highlighting the opportunity for scale within the multifamily sector,” she added.
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