MRI’s Rental Truths: Where SA Landlords win and risk

• Residential escalations around 4.76% y/y; sectional-title gross yields highest since 2006, net returns clipped by rising levies.
• Commercial escalations keep sliding; only around 72 -78% tenants in good standing, while storage stays above 80%.
• Monthly monitoring beats once-off vetting, risk drifts; about a quarter of active commercial tenants flag very high risk.

At the API PropTech Summit in Cape Town, Waldo Marcus, Director of Marketing at MRI Software/TPN, unpacked some hard rental truths for South African commercial and residential landlords and owners.

From how narrative framing can skew the same dataset, why continuous tenant monitoring beats once-off vetting, and how pricing must follow observed behaviour (not just anecdotes) across provinces, sectors and rent bands. Here are some of the most salient points.

Residential: what the data really show

• Who’s renting: Around 13.6% of active residential tenants applied with passports; 86.4% with SA IDs. Narrative framing matters, same data, different headlines.
• Tenure: Passport holders stay around 30 months on average; SA ID tenants 24 months. By gender, males +-27 months, females +-26 months.
• Risk shift after move-in: Application scores skew low-risk around 61% at entry (women around 61.4%, men around 61%). With monthly monitoring, “average” splits to lower or higher risk, so a once-off vet doesn’t hold.
• Affordability & payment behaviour: Good standing rises with rent band: Around 70% in the ≤R3,000 band pay in full vs 90% in R7,000 - R25,000.
• Yields & escalations: Sectional-title gross yields are the best since 2006, but levies (often double-digit increases) erode net. Q2’25 residential escalations around 4.76%: Gauteng is the driver; Western Cape is slowing; KZN/Eastern Cape broadly flat.

Commercial: longer leases, thinner ice

• Lease terms: KZN averages around 79 months (bespoke industrial space). Gauteng/Western Cape around 5 years; Northern Cape/Limpopo shortest.
• Early warning flags among actives: AR deregulation risk 9.6%, business rescue 0.2%, liquidations 1%, all inside current portfolios.
• Good standing by sector: Generic commercial 72.3%, retail 77.7%, industrial 78%, storage >80% (long-time star performer).
• Risk at the door: Just over 70% of new entrants rate low/average risk, yet landlords still accept a slice of very-high-risk tenants to keep occupancy, pushing arrears/legal load later.
• Escalations trend: Downward since 2016; Q2’25 3.61%, around 1ppt below residential. Post-COVID recoveries in good standing have edged back 1ppt nationwide; utilities instability (e.g., water) is a new drag.

What MRI (with TPN data) actually does

• Tracks active leases monthly (not just applications) across 1.3m+ residential and 240k+ commercial records per quarter.
• Scores risk and flags deterioration (e.g., AR deregistration, business rescue, liquidations) so owners see risk drift early.
• Maps payment behaviour via Rental Payment Profiles (RPP) by province, sector, rent band and links to yields/escalations for pricing decisions.

So what? Impacts by stakeholder

Landlords

• Re-underwrite quarterly. Bake MRI/TPN monitoring into policy; don’t rely on lease-day vetting.
• Price with precision. Escalations by province and rent-band sweet spots (R7k–R25k) support stronger payment behaviour.
• Sectional-title caution. Great gross yield ≠ great net yield, model levies and arrears risk.

Investors

• Tilt to resilient niches: Storage and small-box industrial remain defensible; select residential in nodes with around 5% escalations and tight supply.
• Stress-test cash flows: Assume slower commercial escalations and potential arrears creep; value deals on net not headline escalations.

Property Managers

• Institutionalise monitoring: Monthly risk drift checks → proactive arrears management and early restructures.
• Covenant management: Track AR filings/business-rescue and trigger review meetings; escalate security where needed.
• Data-led leasing: If you must take higher-risk tenants to fill space, offset with shorter terms, higher deposits, step-ups.

Way forward

• Move from static to continuous underwriting. Make monthly monitoring a standard clause and workflow.
• Play offence with pricing. Use provincial/sector rent-escalation heatmaps and rent-band behaviour to optimise renewals.
• Net, not gross. Model levies, utilities volatility, and arrears into every yield conversation.
• Prepare for policy risk. Build scenarios for rental regulation and higher property taxes; protect margins now.
• Invest in operational data. Centralise MRI/TPN feeds into dashboards; align asset, leasing, and credit teams around one risk view.

Bottom line

SA rentals are investable, but only if you run them like a lender. Build renewals off provincial/rent-band data, model levies and utilities volatility into yields, and monitor risk monthly to act before arrears bite.

Put MRI/TPN telemetry at the centre of asset decisions, prepare for tighter regulation, and you’ll compound returns while others fly blind.

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