SA’s REIT sector showed recovery in February 2025, rebounding by 1.2% after the price declines seen in January. This positive return outpaced the broader equity market which remained flat 0.%, and the bond market, which posted a modest 0.1% gain.

Despite the sector posting a 2.5% decline year-to-date, underperforming both the equity and bond markets, Ian Anderson, Head of Property and Portfolio Manager at Merchant West Investments, as well as compiler of the SA REIT Association’s monthly Chart Book, and Richard Henwood, Portfolio Manager at Merchant West Investments, say that the overall investment outlook for SA’s REIT sector remains positive for 2025.

They believe that investors can expect a modest improvement in property fundamentals along with the possibility of lower interest rates supported by recent developments such as a 25-basis point rate cut by SARB, the formation of the GNU, a reduction in load shedding, and the introduction of the two-pot retirement system at the end of 2024.

With these factors in mind, SA’s REIT sector is projected to see average growth in distributable income of between 3% to 5% – a positive turnaround after three years of stagnation. However, Anderson and Henwood caution that the market may face increased volatility due to global geopolitical tensions which could fuel inflation and impact economic growth globally.

In South Africa, the 2025 Budget Speech was delayed further contributing to uncertainty in the market.

Amid these local and international challenges, REITs have shown varying degrees of success like Burstone Group whose partnership with TPG Angelo Gordon saw the acquisition of logistics assets worth A$280 million in Australia while Dipula Income Fund reported strong growth in retail tenant turnover and improvements in operating metrics. Equites Property Fund also remains optimistic, forecasting stable dividends and a reduction in its loan-to-value ratio.

Overall, while the South African REIT sector continues to face challenges, particularly from global uncertainties, the sector’s fundamentals appear poised for gradual improvement, they say.