Putprop shares insight into SA’s industrial, commercial and retail property market

Looking back and looking forward


James Smith of Putprop shares insight into SA's industrial, commercial and retail property market
James Smith of Putprop shares his thoughts with Rosh Pinah on South African Property

Putprop Limited is a company listed on the Johannesburg Securities Exchange, and operates a portfolio of properties spread across the office, retail and industrial sectors.  The group has an ongoing focus on strengthening the quality of its property portfolio through acquisitions and disposals as well as refurbishments, upgrades and redevelopment of specific properties.

René Styber is a director of Rosh Pinah and a non-executive director of Putprop Limited. To get an idea of what is happening in the retail, commercial and industrial property markets in South Africa, Rosh Pinah put some questions to James Smith, Putprop’s Chief Financial Officer.

Rosh Pinah (RP): Looking back over the past two years, how would you describe the retail, commercial and industrial property market?

James Smith (JS): One way of doing this is to compare the Listed Property Index (LPI) on the JSE with the overall index – the All Share Index (ALSI) – and the other indexes.  In this context, property has been the worst-performing sector of them all.  The index fell by over 25% during 2018, a significant underperformance that reflected the overall state of the sector.  This drop was far worse than the overall performance of the ALSI over the same period.  There has been an improvement so far in 2019 – the LPI has gone up by about 2.5% –  but seen in the context of the ALSI, which has grown by 10% or so, it is still a poor result.

RP: What has been the root cause of this trend?

JS: Confidence, or rather, a lack of confidence.  It is a function of the general economic situation in South Africa – low growth, high unemployment, pressure on consumer spending and everything else.  Coupled with low investment levels by businesses, this lack of confidence amongst our customer base has seen strong downward pressure on rentals, little take-up by new tenants and an exodus of some tenants whose businesses are struggling or have even failed.

RP: Is there one sector in particular that has been the worst affected?

JS: Yes, I would say the industrial sector, although retail and office rentals have also taken a knock.

RP: What about office space?  It seems like nodes such as central Sandton and Rosebank in Johannesburg are booming.

JS: Those two areas, in particular, are quite deceptive.  Yes, there has been a huge amount of new office space built.  If you drive into the area, the new buildings are very obvious.  But this does not mean that there has been an equivalent increase in uptake.  Some businesses have erected wonderful new buildings, which they are occupying, but often their old buildings are now standing empty.  Right now, there is something like 450 000 square metres of unoccupied office space available in Sandton. Apparently, in 2020 another million square metres will become available.

RP: Are there any sectors of the market that are looking promising?

JS: Yes, we have found that community shopping centres in rural areas are showing real potential.  In the outlying areas people need centres that offer a selection of essential shopping facilities in one place.  If they are well-served by taxis, the people can come from quite far away to do their shopping and also enjoy some recreational activities like restaurants.

In the cities, we have found that smaller shopping centres are doing better than the big malls.  These offer a range of core retail stores such as supermarkets and large pharmacy-type stores, together with a selection of “fun” outlets such as boutiques, hairdressers and restaurants.  Many have added-value outlets such as medical consulting rooms.  These are accessible and tend to attract the people who live close by.  Often parking is free, which is a big attraction.

RP: What is the outlook for 2020?

JS: Generically, much the same.  Apart from a few niche sectors and regions, we do not see any sort of dramatic improvement in the property sector in the short-term.  The problems with Eskom are core to this. With rolling blackouts, businesses suffer serious losses and even the possibility of load-shedding episodes in the future is causing potential new business-owners to hold back.  Until there is a real increase in economic growth and confidence, and a reasonable expectation of stable electricity supply, we will see a continued downward pressure on rentals.

RP: How does Putprop plan to manage this tough period ahead?

JS: Basically, we will continue with our existing strategy, which has served us well over the past two difficult years.  At this stage we don’t plan to make any acquisitions and it will be all about consolidating existing businesses.  Where we can, we will increase our shareholdings in existing partner businesses.  We are in a holding pattern, where building new partnerships and consolidating existing ones is the key.

RP: Are you optimistic or pessimistic?

JS: Right now, it’s too tough to call.  We all felt that the arrival of Cyril Ramaphosa at the beginning of 2018 would signal a new economic dawn – the famous “Ramaphoria effect” – but this did not materialise.  We are much more vigilant now.  It’s a matter of wait and see but, of course, you never know when the tide will turn in our favour.  We need to be ready.


Rosh Pinah have put down their thoughts and perspective on Property in South Africa too, read about it below.

  • Commercial property sector challenges post-Covid and beyond


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