Real Estate Investor Magazine South Africa October 2013 | Page 49

COMMERCIAL
growth causes increased vacancies and rising
operating costs will eat into profits.” So which
is better, listed or unlisted property investment
in view of the economical state? Taking a look
at the two graphs below, it is easy to see that
listed portfolios provide a higher real return
when compared to unlisted portfolios, based
on historical returns.
Historical property performance
of listed funds
1995-2012
Mean* total

21,1

SD of mean return

19,1

Mean CPI

6,3

Real return

14,8

*Arithmetic mean

Historical property performance of unlisted portfolios
62-77
(16 yrs)

77-95
(19 yrs)

95-12
(18 yrs)

Mean total return % †

9,5

17,2

13,4

SD of mean return

2,5

5,7

7,7

Mean CPI

4,6

13,0

6,3

Real return

4,8

4,2

7,1

† Geometric mean
*Arithmetic mean
Source of data: Rode’s Time Series

Results
Growthpoint Properties, the largest South
African REIT on the JSE as of the 1st of July
2013, reported positive growth for the year end,
(30th June 2013), reporting distribution growth
of 7.2% to investors. “Net property income from
our South African property portfolio increased
by 5.7%,” reports Norbert Sasse, CEO of
Growthpoint in South Africa. Growthpoint
made five strategic property acquisitions during
the year for R492 million and disposed of 23
non-core properties for R869 million, making
a profit of R292 million on cost. It also invested
R904 million in value-enhancing developments
and redevelopments. Furthermore Sasse notes:
“We’ll continue ref ining and growing our
South African portfolio with quality assets.
We also aim to increase our exposure to retail
propert y.” Hyprop Investments Limited,
another conversion to the JSE-listed REIT
structure, also posted positive results with
distributions up 7,6% to 213 cents a unit. CEO
Pieter Prinsloo says: “Notwithstanding a
challenging economic environment our centres
performed well.” Distributable earnings from
shopping centres was up 7,2% with Canal Walk
www.reimag.co.za

and Hyde Park reflecting double-digit growth.
He adds: “Our focus will remain on yieldenhancing expansions and refurbishments at
existing shopping centres. Taking into account
the short-term dilution effect of the Rosebank
Mall redevelopment, we expect distribution
growth of 6,5% to 8,5% for the year to June
2014.” These two sets of results show that while
the economic environment is a challenging one,
there are still opportunities to invest in and
profit from.

Retail
Retail remains a concern as subdued consumer
consumption slows growth. In the last eight
years new growth in the retail sector was driven
by growth in household consumption but with
consumers under increased pressure from rising
costs and soaring levels of unsecured lending,
this growth has slowed in 2013. Ian Anderson,
chief investment officer at Grindrod Asset
Management says, “I think that increasingly
our retailers are going to struggle and therefore
our retail landlords will also be under pressure.”
Anderson adds, “There will be disparities in
the performance of retail properties based on
their size and location. The regional and superregional centres are likely to come through
this unscathed, while smaller community and
neighbourhood centres, which have proliferated
across the country, will face fairly substantial
risk”. The increase in unsecured lending has
placed enormous pressure on consumers as
they face soaring debts that they are unable
to repay. By the end of 2012, there were over
1.6m unsecured loans on the books of South

African lenders, up from just over 700 000 at
the beginning of 2010.
There has also been a shift in the supply
of retail centres, with rural retail centre
demand overtaking that of cities. According
to Urban Landmark, 160 retail centres have
been developed nationally in township and
rural areas of South Africa between 1962
and 2009, covering about 2-million m² of
retail floor space. There is still huge demand
for rural retail centres. In South Africa,
people living in rural areas and townships (or
second economy locations) spend more than
R 308 Billion annually, representing 41
percent of total consumer spending. Research
shows that South African Shopping centre
development trends are moving towards
an oversupply situation in urban areas, yet
retailers are still cautious when it comes to
considering the opportunities within township
and rural areas.
New supply of shop space (m2)
Cities

Smaller towns/
rural areas

2010

233.065

164.823

2011

352.120

45.100

2012

227.340

259.120

2013 (tentative)

308.218

336.269

Source of data: Rode

Office sector
The office sector continues to struggle due
to slowing economic growth. Stan Garrun,
October 2013 SA Real Estate Investor

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