South African REIT sector posts 4.1% gain in May, outpacing equity and bond markets

The South African REIT sector continued its upward trajectory in May, posting a 4.1% gain, once again outperforming the equity market returns of 3.1% and the 2.7% rise in bonds, said Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments.

Anderson, compiler of the SA REIT Association’s monthly Chart Book, attributed the sector’s improving sentiment to expectations of lower interest rates in South Africa, a small reprieve in global tariff tensions, and growing evidence that property fundamentals are strengthening.

“These trends set the stage for higher distributable earnings growth across the sector in 2025 and 2026,” said Anderson.

The REIT sector gain in May builds on April’s 6.9% surge, bringing the sector’s year-to-date return to 6.7% - a recovery from a slow start in January.

While the sector’s performance still trailed the broader equity market’s gain of 14%, SA REITs had now outpaced the bond market in 2025, signaling renewed investor confidence, he said. This comes as South Africa’s 10-year government bond yield recently dropped to below 10% for the first time in more than three years.

May saw several REITs reporting their financial results, reinforcing the sector’s ongoing recovery:

Redefine Properties results for the six months to end-February 2025 saw revenue up 3.5% and distributable income per share rising 0.7%, leading to an interim dividend increase. Full-year guidance was maintained, with expectations that distributable income per share will range between 50c and 53c - representing growth of between 0% and 6%.

Equites Property Fund delivered full-year results in line with market expectations, increasing distributions by 2.1% to 133.92 cents per share. More notably, guidance for 2026 far exceeded consensus forecasts, with anticipated distribution growth between 5% and 7%, driven by strong rental growth and a high-quality logistics portfolio following two years of asset recycling.

Equites was the top-performing REIT in May, with its share price rallying 10%.

Western Cape focused Spear REIT also benefited from robust results, reporting a 9% share price increase following its full-year results to end-February 2025. The company also announced the acquisition of Berg River Business Park in Paarl for R182.15 million in an all-shares transaction. Management is exploring further acquisitions and developments.

Other REITs reporting results in May included Burstone, Delta, Dipula, Emira, and Octodec, with a common theme emerging - property fundamentals in South Africa are improving across all sub-sectors, reinforcing investor confidence.

The market capitalisation of the SA REIT sector now surpasses R250 billion - marking the first time since January 2020 that it has reached this level.

“With further interest cuts a possibility, stabilising macroeconomic conditions, and improving company guidance, investor confidence remains strong, and the momentum is likely to carry through the remainder of 2025,” said Anderson.

On the impact of the recent 0.25 percentage point cut in interest rates and prospects of further reductions, the Real Estate Investor said in an online report that while many in the property sector had hoped for a deeper 0.50% reduction, “the consensus is that this move represents a positive step towards restoring market confidence, easing pressure on consumers, and stimulating real estate activity. Property leaders welcomed the cut, but have stressed that more aggressive action is needed to drive real growth and unlock broader economic recovery.”

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