The year 2020 saw companies from every sector experience significant pressure as a result of the weakening economy, further exacerbated by the impact of COVID-19. As expected, the hard lockdown and subsequent adjusted levels of lockdown, imposed by government, meant that many businesses were unable to trade, or unable to trade at full potential, while these measures were in place. In December 2020, South Africa experienced its 85th month of a weakening economic cycle.
Real estate, as a sector, came under increased pressure as landlords were required to give tenant relief in the form of discounts and deferrals, thereby reducing their expected income. As incomes came under pressure, many of the Real Estate Investment Trusts (REITs) reduced or withheld their distributions, in an effort to improve their balance sheets. This, in addition to the weakening fundamentals that the sector has experienced over the last three years, saw listed property overall return down 34,5% for the year, a reflection of the difficulty experienced by the sector in South Africa.
South Africa and its real estate sector are set to continue experiencing other headwinds, including failing municipalities and Eskom and its load shedding programme. The continued drain on the fiscus by state-owned entities has been present for a number of years.
As the restrictions eased with the adjusted levels of lockdown, and with increased focus on hygiene requirements and tenant safety, our regional and neighbourhood retail centres began to see their trading row to levels comparable to the previous year, with spend per head at increased levels year-on-year. The big superregionals in the sector are still not back to the pre-COVID-19 levels. Looking ahead, the implementation of the vaccine roll-out is set to improve consumer and business confidence, as was experienced in November 2020 when the news of a vaccine programme was released. We are expecting this sentiment to filter into the property industry.
The shoppertainment strategy at Fourways Mall will benefit from this sentiment as shoppers should return to these centres, for the experience, on a more frequent basis.
As the property landscape continues to change, Accelerate Property Fund (“Accelerate or the Fund”) remains well positioned to adapt to meet the changing needs of the market, as it did when it introduced the shoppertainment concept. By utilising the Fund’s available bulk and repurposing available space, Accelerate looks to diversify its income by incorporating new offerings, including self-storage and residential, thereby expanding the Fund’s presence in Fourways and dominating the node.