‘Tenants are spoilt for choice.’ SA’s largest property group sees a shock rise in vacancies

Growthpoint [JSE:GRT], SA’s largest listed property company, has seen a sharp increase in the vacancies across its 450 buildings.

“Tenants are spoilt for choice and negotiations on renewal and new lets are tough,” the company said in a statement accompanying its results for the year to end-June.

The company owns 450 buildings, including a number of company headquarters and shopping centres like the Brooklyn Mall and Constantia Village Mall. Together, the portfolio of properties is worth R78 billion.

It also has a 50% stake in the V&A Waterfront and owns 66% of Growthpoint Properties Australia, which has 57 properties in Australia.

“Domestic tenants continue to downsize their space, which is placing pressure on all property fundamentals. The oversupply of space across all three sectors is also limiting the group’s ability to grow rentals,” the group said.

In distributable income for the year increased by 5.3% and dividends per share rose 4.6%, despite a sharp 26% increase in vacancies - from 5.4% of its gross leasable area (GLA) to 6.8%. Industrial vacancies jumped by 55% to 6.2% of GLA, while office (+21%) and retail (8%) buildings also saw substantial increases.

The V&A Waterfront, however, saw its vacancy rate fall from 1.8% to 1.2% - however Growthpoint warned that it is “not immune to the erosion in the domestic economy”. Demand from corporates for offices at the V&A will support its investment returns, it added. The V&A continues to look for ways to “densify” the precinct and enhance profit.

While its Australian operation is in “excellent shape with substantial debt headroom for accretive acquisitions”, the market there remains extremely competitive, with global investors vying for assets.

Compiled by Helena Wasserman