The rate backdrop is clearly less supportive than it was a few months ago, but the structural case for SA REITs remains intact.
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Last month, South African real estate investment trusts (REITs) consolidated, delivering a total return of 0.7% for the month after April’s strong rebound.
The sector edged ahead of equities, with the All-Share Index returning -0.3%, while trailing bonds, with the All-Bond Index up 2.9%.
SA REITs are now positive by 2.0% year to date, ahead of the All-Share Index at 0.8% but behind the All-Bond Index at 2.7%.
This positions the sector broadly in line with the wider market for the year so far.
According to the latest SA REIT Association Chart Book May 2026, compiled by Ian Anderson, head of Listed Property and Portfolio Manager at Merchant West Investments, much of the listed market’s attention was absorbed by an unusually heavy flow of company results, with the near-flat headline return masking wide dispersion across individual shares.
Rolling 12-month distribution growth held at 9.40%, indicating the underlying income recovery remains intact even as share-price momentum has cooled.
“May’s near-flat return looks more like a pause for breath than a renewed move in either direction,” says Anderson.
“Many funds reported during the month. The common thread was steadily improving distributions, strengthening balance sheets and lower funding costs. The underlying income recovery remains intact, even though share prices are likely to stay sensitive to bond yields and risk appetite.”
Improving distributions, healthier balance sheets and lower funding costs.
May was dominated by company results, with lots of REITs reporting interim or full-year numbers. The common thread was improving distributions, healthier balance sheets and lower funding costs.
The last of these reflects the cumulative interest-rate cuts delivered through 2025 and into early 2026 that fed through most companies’ reporting periods.
Spear marked its 10th anniversary as a listed entity with full-year distribution growth of 6.02% to 86.16 cents, a loan-to-value (LTV) ratio reduced to 22.94% and interest cover of 4.34 times.
It has among the most conservatively geared balance sheets in the sector. Dipula delivered a strong interim performance, with distributable earnings up 20% to R310 million, gearing improved to 34.0% and full-year distribution growth guided to between 7% and 8%.
Redefine lifted interim distributable income 7.4%, raised its dividend 6.9% to 21.83 cents and upgraded full-year guidance to between 6.0% and 7.0% growth, with its LTV improving to 40.3% and the cost of debt easing to 6.9%.
Octodec grew interim distributable income 11.1%, upgraded full-year guidance to between 3% and 5% and continued its portfolio rationalisation, including the agreed R397.5 million disposal of Killarney Mall.
Emira reported full-year dividend growth of 4.1% to 129.01 cents and a marked strengthening of its balance sheet, with LTV falling from 36.2% to 30.2%.
A clear strategic theme was Emira’s approach towards building cornerstone stakes in other listed REITs at discounts to underlying value, including a 6.93% holding in SA Corporate.
Equites delivered distribution growth of 5.3% to 141.01 cents while completing its exit from the United Kingdom to become a pure-play South African logistics platform, with portfolio vacancies of just 0.3% and a weighted average lease expiry of 13.7 years.
The recovery nonetheless remained uneven. Delta Property Fund returned to profitability, posting net profit of R127.0 million against a prior-year loss and lifting its rental collection rate to 99.8%, although its balance sheet remains under pressure and no dividend was declared, a reminder that conditions across the sector are not uniform.
“The results confirmed what the distribution data has been indicating for some time,” Anderson notes.
“Balance sheets are in their best shape in years and most funds have secured the benefit of lower funding costs through 2025. The range of outcomes remains significant, while the direction for the bulk of the sector is clearly positive.”
Corporate activity was said to again be a defining feature of the month, both at home and offshore. The Emira and Octodec situation reached its conclusion, with Emira confirming that it now holds 23.5% of Octodec, approximately 62.5 million shares, following a combination of on-market purchases and acceptances of its voluntary offer.
The position makes Emira the largest shareholder in Octodec without triggering a mandatory offer.
Offshore expansion was a recurring theme. Hyprop agreed to acquire Galleria Burgas, a prime 36,700 m² shopping centre on Bulgaria’s east coast, for a transaction value of €122.2 million, extending its Eastern European footprint in a transaction expected to be accretive and to lift group LTV to 33.5%.
Vukile confirmed its entry into Italy with a platform acquisition of three shopping centres at a yield of around 10%, alongside full-year 2027 guidance of between 8% and 10% growth in funds from operations (FFO) and between 10% and 12% dividend growth.
A successful accelerated bookbuild raised approximately R2.8 billion at R22.60 per share.
Spear remained the most active dealmaker in its home market, announcing a R960 million acquisition of three premium-grade office buildings at 1 Sportica Crescent in Tygervalley, let to Santam, Glacier and the broader Sanlam Group at a 9.67% yield, while continuing to recycle capital through the disposal of non-core assets for approximately R107 million.
Attacq confirmed the permanent appointment of Peter de Villiers as chief financial officer with effect from June 1.
The breadth of activity reflects a sector confidently deploying capital, says Joanne Solomon, CEO of the SA REIT Association.
“What stands out about May is the combination of strong results and decisive corporate action. Funds are recapitalising, consolidating positions at home and deploying capital offshore into Bulgaria, Italy and beyond.
"This is the behaviour of a sector with healthy balance sheets and renewed access to capital. It shows the confidence that has built up around real estate investment trusts over the past 18 months.”
The most notable change during the month is said to have come from the interest-rate environment. At its late-May meeting the South African Reserve Bank raised the repo rate by 25 basis points to 7.0%, its first increase since 2023, as rising external risks and higher energy prices pushed both actual and expected inflation higher and prompted a step back from the easing strategy that had supported the sector through 2025.
The move was said to be a reminder that real estate investment trusts remain highly sensitive to bond yields and that the easing cycle which powered much of the 2024 and 2025 re-rating has paused.
Solomon adds: “The rate backdrop is clearly less supportive than it was a few months ago, but 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. A more demanding rate environment raises the premium on quality and execution. It does not undo the progress the sector has made.”
Apart from the monthly numbers, May also saw the SA REIT Association release the Third Edition of its Best Practice Recommendations (BPR), the framework that governs how members of the association measure and report financial and operational performance.
Effective for reporting periods commencing on or after 1 January 2026, it is the most substantive update to the framework since 2019. It arrives as the association takes its place as the South African member of the Global REIT Alliance (GRA), the international coalition whose members collectively represent companies managing the bulk of the world’s REIT market capitalisation.
Looking ahead to the remainder of 2026 and into 2027 Anderson expects the next phase of returns to be less substantial.
“Distribution growth has recovered, balance sheets are in their best shape in years and most funds have locked in lower funding costs,” he says.
“At the same time, much of the good news now appears to be reflected in prices and the interest-rate backdrop is no longer the unambiguous tailwind it was. The next phase of returns is therefore likely to be execution-driven and increasingly discerning.
"Funds with defensive retail, logistics and self-storage exposure, disciplined leverage and the ability to raise and deploy capital should remain best placed to deliver sustainable real distribution growth into 2027, even in a less forgiving rate environment.”
According to financial data provided by S&P Global Market Intelligence LLC, analysis provided by Simply Wall Street, an investment platform, despite it being negative, analysts are least pessimistic on the Retail REITs industry since they expect its earnings to decline by only 3.3% per year over the next 5 years, which is not as bad as the other industries.
This is said to be a reversal from its past annual earnings growth rate of 28% per year.
In contrast, the Retail REITs industry is expected to see its earnings decline by 3.3% per year over the next few years.
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