SA’s real estate investment trusts (Reits) staged a strong recovery in October as liquidity improved and borrowing costs moderated, driving a sharp rerating across the board.
According to the SA Reit Association monthly chart for October, the SA Reit index gained 10.8% — its strongest monthly gain since 2021 — outpacing equities and bonds by a wide margin.
“Reits staged a decisive rally in October, with the SA Reit index returning 10.8% for the month and outpacing equities at 1.6% and bonds at 2.6%. October marked a turning point as investors rotated back into the sector, pricing in faster dividend growth and a healthier cost of capital,” the association said.
The rebound lifted year-to-date returns to 26.4% to end-October, as firmer sentiment, accelerating dividend payouts and easing financial conditions reignited investor interest in the once-lagging asset class.
Ian Anderson, head of listed property and portfolio manager at Merchant West Investments, which compiles SA Reit Chart Book, noted that trading activity was intense with just less than R14bn changing hands during the month, excluding Vukile’s R2.65bn accelerated bookbuild placed at a small discount to its net asset value (NAV).
“This is what renewed confidence looks like. Balance sheets are stronger, distributions are accelerating and selective external growth is back on the table,” Anderson said.
Meanwhile, Golden Section Equity Research MD Gareth Elston said in the October SA listed property review that listed property sector in SA recovered strongly from its small October dip, supported by firmer inflation, a softer global rate backdrop and renewed capital inflows into income-yielding assets.
Elston noted that the all-property index delivered an 8.13% revenue for the month bringing its year-to-date gains to 21.11%.
Anderson attributed October’s strong advance to a combination of softer long-bond yields, visible growth in distributable income and narrowing discounts to NAV.
“On a forward view, we see sector dividends compounding in the high single digits, with a current forward yield of around 7.5%. If bond yields remain range-bound, double-digit total returns over the medium term are achievable,” he said.
The sector’s risk-return profile continues to stand apart from local equities and bonds, with five-year correlation metrics and rolling return data underscoring the diversification value of Reits in multi-asset portfolios, the association said.
Some of the moves in the sector that raised confidence in October include Accelerate Property Fund’s nearly 18% surge after shareholders rejected founder Michael Georgiou’s re-election, Emira Property Fund increasing its stake in SA Corporate Real Estate to 8.7% of shares in issue, Fairvest’s earnings-accretive acquisitions of Jozini and Tugela Ferry malls, and SA Corporate’s purchase of the 1,960-unit Parks Lifestyle Apartments alongside the sale of Bluff Towers Shopping Centre.
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