Despite the “turbulence” in global markets, the South African real estate investment trust (Reit) sector is in significantly better shape today than it was five years ago, according to Merchant West Investments listed property and portfolio manager head Ian Anderson, who compiles the South African Real Estate Investment Trust Association’s (SA Reit’s) monthly Chart Book.

He draws a stark contrast between the present and the sharp downturn the sector experienced during the Covid-19 pandemic.

“The current turmoil in global financial markets comes almost exactly five years after the last major drawdown for South Africa’s listed property sector, when the South African economy was shuttered at the start of the pandemic.

“Between March 2017 and March 2020, South African Reits, on average, lost more than 70% of their value – in the years since, the sector has clawed back nearly 68% in value – excluding dividends – though it remains more than 50% below March 2017 levels,” says Anderson.

Amid political and economic uncertainty spreading across global markets, investors are questioning whether “history might repeat itself”.

However, Anderson reassures that large drawdowns from current levels are “highly unlikely”.

Firstly, he explains that South African Reits are trading at significant discounts to net asset value – unlike the premium conditions seen at the end of 2017.

Secondly, he notes that the sector has spent the post-pandemic years strengthening its balance sheets through lower payout ratios, strategic asset recycling and timely equity capital raises. This has helped to bring down loan-to-value ratios across most of the sector.

Anderson says that, while economic growth may be sluggish or even turn negative, the context is vastly different from 2020.

“Economies remain open, tenants continue to trade and rents are being paid. That’s a far cry from the conditions during April and May of 2020.”

He does caution, however, that short-term volatility is likely to persist, particularly as global headlines are dominated by geopolitical tensions and trade disputes – especially between the US and China.

Beneath that “noise”, property fundamentals in South Africa continue to improve.

“Companies that reported results in March, including sector heavyweight Growthpoint Properties, all reported improved trading conditions in their South African portfolios,” Anderson says.

Growthpoint, for example, has revised its guidance upward, from a decline in distributable income per share (DIPS) to expected growth of between 1% and 3% for the financial year ending on June 30.

The company saw a 6.2% increase in South African net property income for the six months to December 2024, while the V&A Waterfront, in the Western Cape, recorded a 16.6% surge in like-for-like net property income, driven by increased tourism, Anderson points out.

Other Reits are also showing positive momentum.

Resilient, for example, exceeded its dividend guidance after posting a 7.5% increase in comparable net property income, while Hyprop Investments delivered improved results and raised its dividend payout ratio thanks to a healthier balance sheet.

While this year has, so far, been more subdued than 2024, Anderson maintains that the path forward for the sector remains promising.

“The improving property fundamentals in South Africa continue to point towards a return to net property income and dividend growth for the sector over the next two to three years. Investors should not lose sight of that,” he expresses.

In his view, the South African Reit sector is not only stronger than it was five years ago – it is also better positioned to “weather the uncertainty that lies ahead”.