Octodec Investments boosts dividends amid resilient inner-city portfolio performance

Octodec Investments, a prominent JSE-listed Real Estate Investment Trust (REIT) primarily operating in Tshwane and Johannesburg, has reported a 7.6% increase in its full-year dividend, now standing at 134.5 cents per share for the year ending August 31.

This rise followed the declaration of a final dividend of 72.5 cents per share, showcasing the company’s commitment to returning value to its shareholders amidst a volatile economic climate.

CEO Jeffrey Wapnick, attributed an 8.2% rise in distributable income per share to a "resilient portfolio performance." The total property portfolio, valued at R11.2 billion, recorded a revenue growth of 4.6%, amounting to R2.2bn. Notably, all sectors aided this growth, with residential properties and shopping centres emerging as the strongest performers. The overall vacancy rate simultaneously improved, decreasing to 12.3% from a previous 14.9%.

"Focused strategic actions and disciplined execution saw us grow rental across all sectors, meaningfully improve occupancies, secure lower funding rates, and enhance the portfolio to drive sustainable value creation," stated Wapnick.

He said that despite persistent challenges, a gradual improvement in market confidence, alongside lower inflation and a decline in interest rates, has contributed to a more favourable operating environment.

While careful cost management ensured increases were kept in line with inflation, Octodec did note specific pressures. Property expenses rose by 4.1%, driven by above-inflation hikes in utilities, cleaning, and security costs, as well as bad debt provisions. In contrast, administrative and corporate expenses increased by 4.9%, and net finance costs increased by just 0.6% due to maturing interest rate swaps, counterbalanced by improved margins on refinanced borrowings.

A significant challenge remained in Lilian Ngoyi Street in the Johannesburg CBD, which was under repair for the entirety of the financial year, following a gas explosion on July 20, 2023.

This incident adversely affected both retail street shops and the residential sector, with tenants of 14 impacted properties facing limited accessibility. The street reopened on September 12, 2025, with management optimistic about improving trading conditions as foot traffic and buying behaviours gradually recover.

In the residential sector, which largely consists of affordable rental apartments and student accommodation in urban areas, vacancies fell to 8% from 9.2%, and rental income increased by 5.4%. Enhanced occupancy rates at The Fields—the result of increased National Student Financial Aid Scheme (NSFAS) funding—had a notable impact.

"Our secure and well-maintained residential properties remain in high demand, especially as the shortage of quality accommodation at affordable prices continues," Wapnick added, emphasising opportunities for potential conversions of underperforming offices into residential or mixed-use assets.

In a testament to this innovation, Octodec launched its communal living pilot project, "Yethu City". This product, designed to offer lower-market entry point rentals, sustainable practices, and tech-enabled features, achieved full residential occupancy within ten weeks.

"The award-winning pilot has demonstrated strong potential for replication and scale as Octodec continues to innovate to address evolving market needs," Wapnick said.

Furthermore, Octodec's largely convenience-led shopping centre portfolio saw core vacancies reduced to 6.9%, compared to 10% at the end of the 2024 financial year. Rental income grew by 6.2%, reflecting effective tenant management and strong demand for retail offerings. Notably, the 50% joint venture Blaauw Village in Pretoria North performed exceptionally well, reporting an astounding 81.8% increase in income driven by rental growth and cost efficiencies.

However, Octodec's Johannesburg street retail segment faced challenges related to tenant sustainability due to consumer pressure and ongoing damage from the Lilian Ngoyi Street incident. Rental income increased marginally by 1.2%, or 2% on a like-for-like basis, while core vacancies decreased to 12% from 14%.

Addressing its office portfolio, Octodec noted that smaller, affordable office spaces continued to attract niche operators and small businesses. The strategy of repurposing under-utilised office buildings in prime locations proved successful, decreasing core vacancies to 20.8% from 24.3% and boosting rental income by 4.9%, or 8% on a like-for-like basis, thanks in part to lease adjustments from government renewals.

The industrial sector also showed promise, with core vacancies falling to 5.6% from 10%, spurred on by the letting of larger flexible spaces tailored for SMEs, while rental income increased by 2.4% or 6.1% on a like-for-like basis..

During the past year, Octodec sold 17 smaller non-core properties for total net proceeds of R152.3 million. Proceeds were directed towards reducing debt, which decreased from R4.4bn to R4.3bn. This, combined with a slight increase in portfolio value, lowered the loan-to-value ratio to 38.2% from 39.2%. 

"Strategic asset recycling and disciplined treasury management were key to delivering these results and strengthening Octodec," said Riaan Erasmus, Deputy CEO and financial director.

Looking ahead, Octodec’s board approved a refreshed strategy focused on rationalising the portfolio and its locations to yield higher returns. This will be complemented by a newly approved sustainability plan aimed at improving overall portfolio performance.

In line with this strategy, five additional properties were sold after the reporting period for a gross consideration of R48.4 m, while efforts to sell Killarney Mall remain underway,

In a year filled with resilience and strategic adaptability, Octodec Investments has redefined its approach to property management, delivering notable financial returns and positioning itself for future growth in a competitive market. Investors and stakeholders alike can look forward to the company's ambitious plans as it navigates the evolving landscape of real estate in South Africa.

BUSINESS REPORT