Coronavirus: South African logistics shines amid lockdown

In depth
This article is part of the dossier: Corona Chronicles: 4 May – 7 May

By David Whitehouse

Posted on Thursday, 7 May 2020 15:17
Shoppers stock up on groceries at a Makro store in Johannesburg, South Africa, March 16, 2020. REUTERS/Siphiwe Sibeko

South African investors in real estate for logistics have so far been largely shielded from non-payment of rent caused by lockdown.

The need among retailers to be able to supply customers who are increasingly demanding about the channel of delivery means that demand for warehouses has strong prospects for growth.

“We favour logistics and warehousing globally,” says Garreth Elston, chief investment officer at Reitway Global in Cape Town.

“South Africa is no exception,” but the sector’s outlook can’t be divorced from that of the overall economy, he says.

READ MORE: Coronavirus: Ramaphosa ramps up economic relief measures as pandemic grows

Retailers still have a lock of unsold stock sitting in warehouses and will be wary of making new agreements to take on more space, says Elston.

Still, the logistics sector has “stood up quite well” during the lockdown. Cashflows have remained strong despite a degree of stress caused by lockdown.

“People are paying their rent. In terms of four walls and a roof, it’s the sector we’re most positive on,” he adds.

In the future, there will be a stronger need for space for fast-moving consumer goods such as food and beverages, he says. “That’s where the global trend is.”

Retail driven warehousing, storage and distribution spaces are “on a strong growth path in the short to medium term” given the trend towards e-commerce, according to research from Jones Lang Lasalle (JLL) on South African real estate in the first quarter.

  • The trend is set to be strengthened as consumer preferences evolve, notes the research.
  • That contrasts with the outlook for industrial real estate, where JLL says vacancy levels are set to rise.


“Logistics is likely to be a beneficiary of the acceleration of the increasing penetration of e-commerce,” says Craig Smith, head of research and property at Anchor Stockbrokers in Johannesburg.

READ MORE: African e-commerce investment must continue when the Jumia party stops

While real-estate investment trusts (REITs) in South Africa such as Growthpoint and Fortress have some exposure to logistics, the only pure play, Elston says, is the Equites REIT.

Equites invests in logistics properties in South Africa, which accounts for 75% of portfolio revenue, with the rest coming from holdings in the UK.

The strategy is to hold logistics properties close to major transport links and urban centres. New acquisitions include properties at Meadowview West and Witfontein in Gauteng.

  • The fund’s net asset value per share rose 3.7% in the year to the end of February, giving a compound annual growth rate of 10% since listing in June 2014.
  • The dividend per share increased by 9.4% to 151.39 cents, giving a yield of 9.5% to the 7 May  share price of 15.91 rand.
  • The NAV per share of 17.55 rand at the end of February that the shares are available on a discount to net assets of 9%. That’s not huge in a time of economic stress, but Equites in 2019 was able to raise equity at a premium to NAV.
  • Leases are getting longer: the Equites weighted average lease expiry period rose to 10.2 years from 8.8 years.
  • A-grade tenants, defined as large companies, multinationals and government, account for 94% of revenue.
  • Revenue shows signs of being able to withstand lockdown: in March and April, 92.8% of rent due in South Africa was collected, and 100% in the UK.

Bottom line: Real estate for logistical use offers one of the few clear growth stories available in South Africa.

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