SA REITs rebuild strength as distributions recover

• Stronger balance sheets and recovering distributions continue supporting confidence across South Africa’s listed property sector.
• REITs consolidate after April rebound as corporate activity and offshore expansion accelerate.
• Higher interest rates may slow momentum, but quality funds continue positioning for long-term growth.

A REITs hold firm through busy results season

South African listed property companies delivered another resilient performance in May, with the sector continuing to stabilise after April’s rebound as a wave of company results confirmed improving balance sheets, healthier distributions and stronger operational fundamentals across much of the market.

According to the latest SA REIT Association Chart Book for May 2026, compiled by Ian Anderson of Merchant West, SA REITs produced a total return of 0.7% for May, outperforming the All Share Index, which declined by 0.3%, while trailing bonds, with the All Bond Index gaining 2.9%. Year-to-date, SA REITs remain in positive territory at 2.0%.

Importantly, rolling 12-month distribution growth remained elevated at 9.4%, highlighting that the sector’s underlying income recovery remains intact despite increased sensitivity to interest rates and bond yields.

Anderson says the near-flat May performance should not be interpreted negatively. Instead, he believes the market paused after a strong recovery phase while investors digested one of the busiest REIT reporting seasons in recent years.

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“May’s near-flat return looks more like a pause for breath than a renewed move in either direction,” says Anderson. “The common thread across reporting season was steadily improving distributions, strengthening balance sheets and lower funding costs.”

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Results period highlights stronger balance sheets

The May reporting season revealed a sector that has materially strengthened over the past two years, particularly following the sharp interest-rate cycle and post-pandemic recovery period.

Spear REIT continued standing out as one of the sector’s most conservatively geared property funds, reporting distribution growth of 6.02%, a reduced loan-to-value ratio of 22.94% and strong interest cover metrics.

Dipula Income Fund delivered one of the stronger interim performances of the month, with distributable earnings increasing 20% and gearing improving to 34%.

Redefine Properties also upgraded guidance after lifting interim distributable income by 7.4%, while lowering debt costs and improving loan-to-value ratios.

Meanwhile, Octodec Investments continued portfolio optimisation efforts while upgrading full-year guidance and progressing with non-core asset disposals.

Emira Property Fund strengthened its balance sheet materially, reducing loan-to-value ratios from 36.2% to 30.2%, while continuing to build strategic positions within the listed property sector.

The logistics sector also remained highly defensive, with Equites Property Fund completing its UK exit to become a pure-play South African logistics platform with exceptionally low vacancies and long lease expiries.

According to Joanne Solomon CEO of SA REIT Association, the breadth of activity reflects a sector increasingly operating from a position of confidence.

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“What stands out about May is the combination of strong results and decisive corporate action. Funds are recapitalising, consolidating positions and deploying capital offshore,” says Solomon.

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Corporate activity & offshore expansion accelerate

One of the clearest themes emerging across the sector is the return of strategic corporate activity and offshore expansion.

Emira strengthened its position in Octodec to become its largest shareholder without triggering a mandatory offer, while several REITs accelerated international expansion initiatives.

Hyprop Investments agreed to acquire a major shopping centre in Bulgaria for €122.2 million, further extending its Eastern European footprint.

Vukile Property Fund simultaneously confirmed its entry into Italy through the acquisition of three shopping centres while also successfully raising approximately R2.8 billion through an accelerated bookbuild.

Spear remained particularly active locally, announcing the R960 million acquisition of premium-grade office assets in Tygervalley at an attractive yield while recycling capital through non-core disposals.

Interest rates shift the narrative again‍

The biggest macroeconomic development during May came from the South African Reserve Bank’s unexpected 25 basis point interest-rate increase, the first rate hike since 2023.

The move signals that the highly supportive easing environment which benefited REITs throughout much of 2024 and 2025 may now be moderating as inflation concerns and energy-price risks re-emerge globally.

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Solomon says the sector remains fundamentally healthier despite the more demanding rate backdrop. “The structural case for REITs remains intact. Distribution growth approaching double digits, healthier balance sheets and a broadening investable universe are all features of a sector in a far stronger position than it was two years ago,” she notes.

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However, she cautions that higher interest rates will increasingly reward operational discipline, quality assets and prudent capital allocation.

Raising the bar on sector disclosure

Beyond financial performance, May also marked an important governance and transparency milestone for the sector.

The SA REIT Association released the Third Edition of its Best Practice Recommendations framework, representing the most significant disclosure update since 2019.

The updated framework standardises reporting metrics around:

• Funds from operations (FFO)
• Net asset value (NAV)
• Loan-to-value calculations
• Interest cover ratios
• Cost-to-income reporting
• Operating metrics
• Auditor assurance standards

The move aligns South African REIT reporting more closely with global best-practice standards following the SA REIT Association’s inclusion within the Global REIT Alliance.

Highlights from the May 2026 Chart Book

Key Sector Metrics

• SA REITs total return for May: 0.7%
• Year-to-date return: 2.0%
• Rolling 12-month distribution growth: 9.4%
• Top performers included Equites, SA Corporate, Fairvest B and Spear.

Major Themes

• Improving distributions and healthier balance sheets
• Accelerating offshore expansion
• Increased corporate consolidation activity
• Logistics, retail and self-storage remaining resilient
• Rising sensitivity to bond yields and interest rates

Outlook: More selective growth ahead

Looking ahead, Anderson believes the next phase of returns will likely become more selective and execution-driven rather than broadly momentum-driven.

While much of the post-rate-cut recovery may already be reflected in pricing, the underlying fundamentals across the sector continue improving steadily. Funds with:

• Defensive retail exposure
• Strong logistics portfolios
• Self-storage exposure
• Conservative gearing
• Efficient capital deployment strategies

Are the ones expected to remain best positioned into 2027.

The broader message emerging from May’s reporting season is clear: South African REITs are no longer merely stabilising after a difficult cycle, many are now repositioning from a far stronger financial footing, with healthier distributions, improving capital discipline and renewed strategic confidence.

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