Despite basic service delivery woes in Joburg, real estate company shines

Octodec, the JSE-listed REIT with properties mainly in central Johannesburg and Tshwane, has reported a robust operational performance, bouyed by improved macroeconomic conditions and despite basic service delivery concerns.

in its pre-close operational update for the six months ending February 28 that was released on Monday, the group said the trading environment has been favourably impacted by lower inflation and declining interest rates, leading to heightened market and consumer confidence.

This translated into improved occupancy rates and rental growth for Octodec’s portfolio of residential, retail, office, and industrial properties. Notably, both residential and retail vacancies have remained stable.

In the residential sector, traditional seasonal trends influenced vacancy rates, with a slight increase observed in Hatfield and Johannesburg. However, The Fields has demonstrated strong letting performance this February, aided by automated lease processing software that has enhanced efficiency and expedited transitions from enquiries to signed leases.

Record occupancy rates are anticipated at The Fields due to strong seasonal letting activity.

Conversely, the Johannesburg region grapples with electricity and water interruptions, presenting challenges for landlords as they strive to compensate for gaps in municipal service delivery. This has hindered the letting of vacant units in the area.

However, Kempton Park and Pretoria showed a marked reduction in vacancies, driven by marketing campaigns and tailored rental offerings to attract new tenants. Despite affordability concerns, Octodec is leveraging the quality and branding of its residential portfolio to both draw in and retain tenants.

The reopening of Lilian Ngoyi Street to traffic in September 2025 renewed optimism in Johannesburg's CBD, following extensive rehabilitation after a devastating gas explosion in July 2023. Phase 2 of these repairs is expected to be completed by August 2026, with early reports indicating improved footfall and trading performance in the area.

As a result, retail letting conditions around Lilian Ngoyi are strengthening, with a growing interest from prospective tenants.

In the commercial space, the vacancy of the City of Tshwane Metropolitan Municipality's Capitol Towers North, which occupied 12,086 square metres, led Octodec to explore various strategies for re-letting or repurposing the space. Projects like the Yethu City residential development aim to offer quality, affordable rental options, complemented by colourful retail and lifestyle amenities.

Year-to-date collection rates for the residential and commercial sectors stand at 95.2% and 97%, respectively, signalling a stable financial environment despite challenges in tenant performance.

Octodec has issued an unsecured corporate bond of R200 million while simultaneously reducing borrowings through the disposal of non-core properties valued at R4,2 billion. Additionally, the firm is on a trajectory to lower its loan-to-value ratio to 35% over the long term, signaling a commitment to financial prudence and operational efficiency.

Octodec's ongoing projects include investments into the Gezina City redevelopment and the introduction of a new shared office concept at Killarney Mall, aimed at bolstering future footfall.

Octodec affirmed its distribution growth guidance for the full year ending August 31, 2026 at a steady range of between 0% and 4%. 

BUSINESS REPORT