Listed Property’s Remarkable Growth Since 1994

Once unloved, untouched and lumped together with equities, it has now become a recognised asset class in its own right. In fact, the listed property sector has outperformed the other two major assets classes, equities and bonds, since 1994. Listed property has returned an average of 21.6% per annum, equities averaged 17.3% per annum and bonds 13.8% per annum.



Indeed, in the past 20 years the sector has never delivered negative income growth. At worst it was flat. Even in mid-2013, when the US Federal Reserve’s announcement of the tapering of Quantitative Easing (QE) triggered volatility across emerging markets, the fundamentals of the listed property sector remained strong.


Given these positives, it’s no wonder that it has grown massively in scope and popularity in South Africa. You only have to cast your mind back to 2002, just 12 years ago, when we launched the STANLIB Property Income Fund. At that time there were only three other players in the domestic real estate unit trust category. In 2014 we have 27 players and virtually every asset manager offers a listed property product.



In the 1990s, pension funds and institutions such as Sanlam, Metropolitan and Momentum owned direct properties as part of their investment portfolios. These investors have seen the diversification benefits and exchanged their physical property assets for listed property portfolios.

Key office parks, malls and industrial development now sit in the listed property space. This leaves Liberty and Old Mutual, which still retain key shopping centres like Sandton City and Eastgate in their portfolios, as the few to buck the trend. To my mind, the professionalisation of the sector has been a crucial change and it has benefitted the entire South African property market. In the past, retirement funds and financial institutions that owned property had no choice but to be their own property managers by default. Now, they can concentrate on their core business functions while reaping the benefits of a diversified property portfolio managed by professionals.

That diversification includes exposure to a range of international markets, among them Australia, Germany, the United Kingdom and Romania. Closer to home, there is exposure to African property markets like Namibia, Zambia, Nigeria, and Ghana. More recently, South African listed property companies are looking to enter Kenya.

As for the physical properties themselves; they are now listed and managed by specialist, dedicated, property companies who know their business backwards and are focused on delivering value for their clients and shareholders.

Also contributing to a more professional sector is better and publicly available research. With so many specialist property management companies involved, there is more data available, more analysis, greater sharing of information and a host of proper measurements. This ranges from yield to occupancy ratios, footfall to average rental increases – all of which can be used to benchmark and track the performance of individual property assets.

Bodies such as the Investment Property Databank (IPD), South African Council of Shopping Centres, South African Property Owners Association and Green Building Council all contribute to a local industry that is expert, well organised and of the most advanced in global terms.

The introduction of the real estate investment trust (REIT) legislation in mid-2013 will help grow the local market even further, as international investors are more likely to invest in a sector that they understand.

REIT legislation – already in place in 35 countries worldwide – offers taxation benefits, greater liquidity, higher yields and capital flexibility. It will only enhance a listed property sector that has already shown to be a sound investment vehicle delivering solid long-term returns.


The retail space has physically migrated since the 1990s. Shoppers moved away from old-style central business districts (CBDs), including downtown Johannesburg with its venerable Carlton Centre, and into the shopping centres in the suburbs. These offer ample parking, security, and all-week convenience of being able to do your entire shopping under one roof, come rain or shine.

More recently we have seen an emergence of a new breed of township shopping centres in both the metropolitan and rural areas. These are big and high-end, with tenant profiles that closely match those in the suburbs. Gym chains like Virgin Active are also seeing value in investing in township property. Virgin Active is already operating in Soweto, for example, at the Maponya Mall and looking to take space at Jabulani mall.


In general, high quality shopping centres in the metropolitan areas are well supported by tenants and showing growth. The centres are being boosted by increasing interest from international retailers, among them Zara from Spain, Cotton On from Australia, America’s Forever 21, and the UK’s Burberry and Top Shop. H&M is set to open their doors in SA shortly.

Apart from giving consumers more choice, these global brands provide increased competition for local retailers which, in turn, are upping their game by expanding and refurbishing their stores as well.


The industrial sector has also changed markedly since 1994. Back then, it was dominated by manufacturing. Now warehousing and distribution properties are in greatest demand. This reflects South Africa’s shift away from home grown manufacturing towards higher levels of imports.


The demand for hotel property was minimal 20 years ago. However, hotels are now increasingly relevant in the listed property space. We have seen the advent of listed funds that specialise in the hotel and hospitality sector like Hospitality Property Fund.

Similarly, listed residential property was unheard of in South Africa until relatively recently. As yet, there is no fund specialising in this market, but listed firms like Premium and Octodec have residential property as part of their offering.

The focus is on high-density lower/middle income apartments in the CBDs, where rental clients are mainly people moving from the townships into central business districts in order to be closer to work. There is notable demand from government workers, as well as from students studying in and around the inner cities.

Given the growing level of environmental awareness, it was probably inevitable that there would be increased interest in properties that are environmentally friendly, save water and require less power to run. At present, South Africa only has two top-rated six-star ‘green’ buildings, but we can expect more such developments from major corporates and multinationals going forward and four and five star rated buildings are popping up every day.

New listed funds are being formed to focus specifically on the environmental property market, but existing funds are also showing interest in what is an up-and-coming-sector. Black-empowered listed property funds are also new to the market. These have a strong focus on national government tenants, partly because the agreements are built on good personal relationships. While in some countries government departments are regarded as ‘A-grade’ tenants, in South Africa this is less so due to slow payment. However, defaults are unlikely and payment is eventually made.


The listed property sector is a far cry from what existed 20 years ago. Of course, listed property will continue to evolve and there are a number of key trends driving listed property forward in South Africa and globally.

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The Allan Gray-Orbis Global Equity Feeder Fund remains fully invested in global equities. The objective of the Fund is to outperform the FTSE World Index at no greater-than average risk of loss in its sector.