Global Real Estate Investment - Orbvest Specialized Investment


"Commercial property investments in general have proven disappointing for South Africans in the last couple of years, after the euphoric returns enjoyed up to end-2017. But niche sectors are still performing, like local and offshore logistics and, interestingly, offshore medical properties.

In 2018, the JSE’s SA listed property index dropped 25%. In 2019, the total return from the index was 1.92%, well below inflation. In the first five months of 2020, the index shed 39%. Although dividends from listed property grew by 8-12% a year between 2014 and 2017, growth slowed to 3.5% in 2019, which again was below inflation.

In response to the economic fall-out from Covid-19, many property companies have warned they will withhold dividends this year to strengthen their balance sheets and until they understand the full fallout from the pandemic. The data is not looking encouraging. Office tenants are cutting space wherever possible, having learned that their reduced workforce can work from home. Retail is under enormous pressure across the board, from the legendary brands like Edgars to the smaller independent brands, and restaurants that just don’t have the fire power to recapitalise and pay rents in a market where there are still restrictions and the consumer is unable to come to the rescue. What’s more, if you are in the hotel and hospitality industry, then there is really no clear path to recovery at this stage and the losses will be devastating.

There’s no refuge in residential property, either. The Lightstone Residential Property Index shows national house price growth in SA peaked at 6.25% in 2014 and has slowed since then to a five-year low of 1.7% in 2019. Lightstone expects, despite the recent interest rate cuts, that growth in the residential housing market will slow again in 2020.

Two specialised sectors of the property market have continued to deliver solid returns throughout the Covid-19 crisis. Logistics is one of the winners due to online e-commerce stores which have enjoyed a surge in online shopping. The other big winner globally is medical office buildings, whose tenants mostly offer essential services. "

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