Sector outperforms the equity market for a fourth month in five as bond yields retreat, with strong balance sheets and continued investor support underpinning its momentum
. South African real estate investment trusts (REITs) delivered a total return of 2.4% in October 2026, moving ahead of both equities and bonds and extending the sector’s lead for the year. The All-Share Index returned -0.4% while the All-Bond Index returned 2.1%. SA REITs have now returned 6.5% year to date, ahead of the All-Bond Index at 5.7% and well clear of the All-Share Index at -3.6%. The sector has outperformed the equity market in four of the last five months.
According to the latest SA REIT Association Chart Book October 2026, compiled by Ian Anderson, Head of Listed Property and Portfolio Manager at Merchant West Investments, October confirmed the resilience of the sector. SA REITs extended their lead for the year at a time when the market was still absorbing the South African Reserve Bank’s September repo rate increase, supported by strong balance sheets, investors willing to fund growth and a constructive Medium-Term Budget Policy Statement (MTBPS).
“SA REITs had another good month,” says Anderson. “The sector has now beaten equities in four of the last five months and is leading both equities and bonds this year. It has done so while the Reserve Bank’s September increase was still being absorbed. A large part of the explanation is balance sheets.”
Broad gains across the sector
Gains were broad-based, with 18 of the 22 counters in the Chart Book ending the month higher. Accelerate (+17.5%) and Texton (+14.1%) led the way, followed by Stor-Age (+7.6%), Delta (+5.9%), Spear (+4.3%) and Redefine (+4.0%). Attacq (+3.7%) and Vukile (+3.6%) also delivered solid gains. During the month, R11.9 billion of SA REIT units changed hands.
The year-to-date leaderboard is headed by Oasis Crescent (+36.4%), Octodec (+25.3%) and Heriot (+23.7%), with Attacq (+17.2%), Spear (+16.8%) and Fairvest A (+14.6%) close behind. Over 12 months, 21 of the 22 counters in the Chart Book have delivered positive returns ranging from 2.2% to 61.9%, led by Heriot (+61.9%), Octodec (+53.3%) and Oasis Crescent (+46.9%). Seventeen of the 22 are positive year to date. Over three years, 13 counters have delivered annualised returns above 30%, led by Fairvest B (+43.5%), Octodec (+42.1%) and Hyprop (+42.0%).
Bond yields retreat as markets recover
Bond markets recovered during October. After a volatile start to the month, long-dated yields retreated across most developed markets by month-end. South African bonds shared in that recovery and then received an additional local boost from the MTBPS. The long bond yield tracked in the Chart Book fell from 8.92% to 8.72%.
The sector’s forward yield edged up from 7.03% to 7.13%, narrowing the spread to bonds from -188 basis points to -159 basis points. The Chart Book records a long-run average differential of -15 basis points.
Measuring value against the right benchmark
Anderson cautions against judging the sector by the Chart Book’s long-run average. That average dates back to August 1998, when SA REITs owned almost exclusively domestic property and the South African long bond was the natural yardstick. It is also distorted by the pandemic period of 2020, when the differential moved temporarily far outside its normal range.
“The long-run average is no longer a fair benchmark,” says Anderson. “Today many of the large caps have significant offshore exposure, where bond yields are much lower, so a more negative spread should be expected. Over the last ten years the spread has averaged -59 basis points and over the last five years -181 basis points. Against those benchmarks, the sector is not expensive relative to bonds and is slightly cheaper than its five-year average.”
A budget that supports the bond market
The MTBPS, tabled on 21 October, delivered encouraging fiscal news. National Treasury reported that government debt peaked at 78.4% of gross domestic product (GDP) in 2025/26, with the consolidated deficit now expected at 3.9% of GDP for 2026/27. Tax revenue is running R17.1 billion ahead of the February estimate, helped by mining, while draft fiscal anchor legislation has been released for comment ahead of its expected tabling in Parliament in 2027. Economic growth is forecast to improve from 1.2% this year to 1.6% in 2027, with inflation expected to return to the 3% target in 2029.
For the bond market, the most important detail was supply. National Treasury cut weekly fixed-rate bond issuance by R600 million to R1.95 billion and announced a bond buyback programme, with the benchmark 10-year government bond yield falling 12 basis points on the day. Households also receive temporary fuel levy relief from November, which supports the retail tenants that make up a large part of SA REIT income.
Joanne Solomon, Chief Executive Officer of the SA REIT Association, says the budget offers welcome support for the sector. “The Medium-Term Budget Policy Statement gave the bond market real support and that flows directly through to our members. Debt has peaked, revenue is running ahead of target and National Treasury is reducing the supply of new bonds while buying some back. Lower bond yields underpin REIT valuations. Fuel levy relief from November also puts money back in consumers’ pockets, which supports the retail tenants at the heart of so many of our members’ portfolios. SA REITs are very well placed to benefit as economic growth gathers pace.”
Interim results confirm healthy momentum
October brought three interim results, an upsized equity raise and an offshore restructure, each pointing to a sector in good health.
Spear grew distributable income per share (DIPS) 8.02% to 47.29 cents and its dividend to 44.92 cents at a 95% payout ratio, already exceeding its original full-year guidance of 6% to 8%. Guidance for the full year has been raised to 9% to 11%. Spear took transfer of R1.4 billion of acquisitions at a blended 8.99% yield, funded mainly with equity, comprising the Santam- and Sanlam-occupied office precinct in Tygervalley and Watergate Centre in Mitchells Plain. Industrial reversions were positive at 13.49% and occupancy stood at 96.6%, while its loan-to-value (LTV) ratio is just 21.91%.
Equites grew its interim dividend 5.1% to 72.57 cents and reaffirmed guidance. The sale of its Aviva portfolio for £200.5 million largely completes its exit from the United Kingdom, with its LTV ratio falling from 35.1% to 28.1%. Most of the proceeds were invested temporarily in listed logistics REITs in the United Kingdom, a decision that paid off when one of those holdings received a takeover bid. South African like-for-like rental growth was 5.3% and valuations rose 2.8%, driven by income rather than lower yields. Seven projects worth R2.4 billion on completion are under construction at yields of 8% to 9%. Equites also raised R650 million in the debt capital market at the tightest spreads it has achieved to date, with 83% of its debt hedged.
Oasis Crescent, which leads the year-to-date table at 36.4%, is ungeared and trades slightly above its net asset value. It is redeveloping Sacks Circle, its second-largest income-producing property, into a logistics facility due for completion in December.
Redefine restructured Horse Group, its Polish retail joint venture, allowing its partner to exit before March 2027 for €150.8 million with a new preferred investor coming in. The transaction supports Redefine’s aim of simplifying its Polish structures and provides a more predictable, cash-backed return on its €50 million interest.
Investors continue to back the sector
Fairvest upsized an accelerated bookbuild from R500 million to R1.25 billion at 675 cents per share, a 2.7% discount to the 30-day volume-weighted average price. The book was still oversubscribed. The proceeds will settle recent acquisitions and fund retail acquisitions currently under negotiation. The raise follows the R900 million Fairvest raised earlier in the year. Together with capital raised by Spear, Fortress and Hyprop, it shows that investors are willing to fund growth in the sector.
Income growth remains strong. Rolling 12-month distribution growth, measured quarterly, stands at 11.09%, the strongest reading since 2017 outside the distorted comparatives of 2021 and 2022. That is more than six percentage points ahead of inflation at 4.4%.
“October was a great month for SA REITs and for the investors who back them,” says Solomon. “The sector now leads both equities and bonds for 2026, building on total returns of 35.8% in 2024 and 38.6% in 2025. Investors continue to support our members with fresh capital on tight terms, as this month’s upsized and oversubscribed bookbuild shows. Balance sheets are in excellent shape, with low gearing and disciplined hedging, while distribution growth remains comfortably ahead of inflation. Our members offer reliable income, real growth and attractive value. That is exactly what long-term investors are looking for.”
Outlook
Looking ahead, Anderson expects the sector’s financial strength and inflation-beating income growth to continue underpinning valuations.
“October’s reporters ranged from no debt at all to loan-to-value ratios of 22% and 28%,” he concludes. “The sector is raising equity on tight terms and companies that hedged their debt have so far been insulated from rising rates. The Medium-Term Budget Policy Statement supports the bond market and, through it, REIT valuations. With most guidance pointing to mid-to-high single-digit growth for the 2027 financial year, current valuations are underpinned by inflation-beating distribution growth forecasts.”
Highlights from the SA REIT Chart Book October 2026
- SA REITs’ total return (October): 2.4%
- All Share Index (October): -0.4%
- All Bond Index (October): 2.1%
- Year-to-date return: 6.5%, ahead of bonds (5.7%) and equities (-3.6%)
- Distribution growth (rolling 12 months): 11.09%, more than six percentage points ahead of inflation
- Monthly gainers: Accelerate (+17.5%), Texton (+14.1%), Stor-Age (+7.6%), Delta (+5.9%) and Spear (+4.3%)
- Year-to-date leaders: Oasis Crescent (+36.4%), Octodec (+25.3%) and Heriot (+23.7%)
- Valuation: Forward yield of 7.13% against a long bond yield of 8.72%, narrowing the spread to -159 basis points from -188 basis points
- Capital raising: Fairvest’s accelerated bookbuild was upsized from R500 million to R1.25 billion and remained oversubscribed
- Fiscal backdrop: The MTBPS cut weekly fixed-rate bond issuance by R600 million to R1.95 billion and announced a bond buyback programme
The SA REIT Association Chart Books are available for download here.
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