Estienne de Klerk’s insights on SA’s listed property sector

If the economy doesn’t grow, the commercial real estate environment will probably still suffer from oversupply issues, says SA Reit Association chair and Growthpoint CEO.  


On this episode of The Property Pod, we have Estienne de Klerk as our guest ahead of the South African Real Estate Investment Trust (SA Reit) Association’s 2022 conference that takes place at the Houghton Hotel in Joburg in Thursday (February 4).

De Klerk has played a leading role in the local commercial property industry for over two decades. He is CEO of Growthpoint Properties South Africa and is also currently chair of the SA Reit Association, which represents the interests of the listed property sector in the country.

Besides his current position at Growthpoint and the SA Reit Association, he has been president of the SA Property Owners Association, among other leadership positions in the sector. In fact, De Klerk played a key part in securing Reit legislation in the country several years back, together with the likes of Professor Keith Engel, among others.

On this podcast, De Klerk gives some valuable insights on where the industry is right now, his expectations for 2022, and some of the challenges and opportunities facing the sector. 

Highlights of his interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.


“The past two years have probably been the darkest years in living memory for real estate, and specifically listed real estate with … Covid – not to forget the terrible riots we experienced in July last year, which also impacted the sector particularly negatively.”

Read: Sapoa welcomes 75% rates rebate for worst riot-damaged properties in Durban

“But the sector has proved its resilience through these difficult times. It’s a very sophisticated sector with excellent management teams running many of the companies … I think the reality is that the businesses are positioned in many respects for a difficult environment.”

“If we look forward, the biggest driver of the health in the sector is always going to be the success of the South African economy and the growth in this economy.”

Offshore forays 

“Increasingly we have seen that due to the difficult times in South Africa, many of the Reits have internationalised their investments. So you are starting to see, to some extent, some of the companies less correlated to the South African economy. But the reality is that for most of them this is still their base, and the share prices are quite correlated to that.”

“I think the big topics will be where the market sees the economy going. Does it see the property sector starting to recover in this coming year? Clearly in the international environment we are quite connected.

“In an environment where we are starting to see interest rates increase, what will the impact be on the listed property sector specifically – and with inflation starting to rear its head globally, quite possibly here in South Africa as well, how does that impact us?”

“I do think that we are in for a very interesting couple of years ahead. I don’t think it necessarily is going to be easy, but there are good opportunities still; and for businesses, certainly like Growthpoint which is reasonably diversified, we are seeing opportunities in specific alternate sectors. So I think there are some of those themes that are coming through too.”

What are your expectations for listed property in 2022? 

“I think fundamentally we are still pretty connected to the economy, and if the economy doesn’t grow then the listed sector probably will still suffer from oversupply issues within the [commercial] real estate environment …

“We are starting to see improvement. For instance, industrial vacancies have dropped off somewhat, so the demand is improving quite a bit there, and then it does look like retail [property] has sort of stabilised.”

“But the office sector, which is clearly the sector which is most correlated directly to the working economy, that sector is still struggling.”

Read: Office property vacancies hit ‘all-time high’ – Sapoa

“In terms of listed [property] sector prices … so share prices per se to a large extent, it boils down to the demand from institutional investors locally and internationally. Unfortunately over the past few years international investors have generally gone in the wrong direction from a South African perspective, selling rather than buying.”

“I think the demand from local investors has also waned somewhat. So the sector clearly has reduced in scale overall …

“As such, some of the institutional investors have sort of swept it in with the rest of the financial services sector, whereas in previous years with the growth of the sector it actually became a separate asset class, and got a specific asset allocation to that.”

Improving confidence levels

“Now hopefully over time, if the sector can garner the confidence, the market has stabilised and things are set to improve, you could quite easily see that money starts flowing back in volume to the sector, which then will support the pricing within the listed property sector.”

“We have seen quite an improvement from, let’s say, the dark days of April 2020 …

“In the past year it improved quite a lot but, given the historic sort of levels to where we are now, the sector must be probably at 50%-odd of its highs. So there’s still quite a bit of work to be done.

“There are certain niche areas, as we’ve spoken [about] earlier. Some of those stocks are trading very strongly and at very low yields, specifically industrial exposure. That’s probably set to continue, given the ongoing growth in that market.”

Read: Equites remains bullish, with R4.2bn in deals on the cards

“But I do see quite a lot of upside in some of the other sectors, just given the large discounts to net asset value that some of these stocks are trading at. So we do see a firming gradually over the next couple of years, but the pace of that recovery, if you like, will to a large extent to be determined by the strength at which the economy is returning.”

“From a Growthpoint perspective we’ve also seen, let’s say, at the Victoria & Alfred Waterfront, which is very exposed to the tourism sector, clearly things started improving beautifully towards the latter part of last year, October/November.”

“And then unfortunately, we had that announcement of the [Omicron] coronavirus variant and all the international lockdowns relative to South African travel. That negatively impacted our tourism sector yet again.”

“I think generally the trend now is that sector is positive, and hopefully that’ll translate into better performance across the board in the tourism sector as well, which is also a big contributor to the South African economy.”

Will the offshore drive continue for SA-listed Reits? 

“Yes, I think so. While there’s a lot of uncertainty around South African politics and economic policy, and obviously a weak economy with not that many positive prospects staring us in the face directly, I do think you’ll find that most real-estate investors probably have one eye across the oceans in different directions.”

“So I think the difficulty for investment at the moment is in a rising interest-rate environment – and we can see that in the USA and in Europe and in Australia or the East now. So it makes pricing a little bit more tricky. But the reality I do think is that a lot of South African real-estate investors still are eagerly seeking to improve or expand their international diversification.”

“To be truthful, it is about diversification players. It’s not any specific anti-South African stance. Ultimately it’s driven by pure commercial factors and there are markets, as you mentioned, in Eastern Europe that are developing, where there’s still decent economic growth and good opportunities.”

“The South African investors have played a significant role in developing those real-estate markets, those commercial real-estate markets. To some extent they’ve done it with South African capital, and on the back of that they’ve generated very, very good returns for the South African fiscus. So ultimately South Africa does benefit from this activity.”

Local opportunities …

“Interestingly enough, the best performing sort of sectors in the real-estate space have been in the sort of niche alternative areas. Clearly the leader for some time now has been industrial, and that’s proven to be a very a good play generally. And then if you go and look at certain specific areas, healthcare for instance, and, as you mentioned, student accommodation, as a developing country we’ve still got niche areas that need significant development.”

“We are well oversupplied in retail and in office across certainly the main metropolitan areas, but I do still think that in maybe some of the more rural and outlying areas there will be opportunities even in those sectors – specifically on the retail side.”

“We’ve also seen that the demand from investors is to some extent more on the alternative and the niche areas, rather than the sort of mainstream commercial areas that they very easily can get access to via the listed sector.”

“The demand for student accommodation – clearly we’ve got a very young population, and there’s a growing demand for education and quality accommodation that goes with that. So there’s a big push from investors in their sort of social and infrastructure mandates to try and improve the supply in these areas.”

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“From our perspective, from a Growthpoint perspective, our funds business, we do see an opportunity to create a vehicle of scale that can attract institutional capital – local and foreign – and that will help grow that sector and ultimately maybe provide another listed Reit when the market is conducive for listing a vehicle like that.

“So this niche area [student accommodation] has quite proliferated in terms of ownership. There are a lot of players, a lot of developers, obviously smaller scale than in the listed sector, and we do think that that consolidating this area a little bit, and getting access to cheaper capital and more structured, let’s call it professional management, over time will prove valuable in this area.”

On a lighter note Estienne, tell us something people may not know about you?

“I was born and I grew up in a little town south of Durban called Port Shepstone. I was very blessed to be able to spend a year in Australia – as an exchange student, actually – which created a long-lasting link to Australia …”

“From a sporting perspective, I’ve always been an avid squash player. More recently, due to a bit of an arm injury I’ve taken up mountain biking. It’s been a painful learning process – I’ve got the scars to prove it.”



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Over the past decade of unmitigated socialist redistributive looting by Luthuli House, the JSE Listed Property Sector has crashed by 90% against the USA SP500 Index. This is what happens to a capitalist in a socialist country. The property sector is the canary in the coal mine.

Property stocks got hammered, not so much for the lost rentals and operating profit hit, but for the market finally realising that most reported earnings for the decade before were revaluation journal entries, not cash.

we need to get back an old accounting rule : unrealised gains or losses sit in a non distributable reserve on balance sheet. One look at the balance sheet then shows the degree of journal entries. The exact same happens in the investment holding companies where management sit around a spreadsheet and decide at what to value their investees.

either accounting needs to get simpler or investors need to get smarter

End of comments.




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