rosebank link
The Rosebank Link building on Oxford Street. Image: Redefine
  • One of the largest property owners in South Africa, Redefine Properties reported its half-year results this week.
  • The lower rental rates the company secured for expiring leases alarmed at least one fund manager.
  • The company reported an average rental reversion rate of negative 6%.
  • For more, go to Business Insider SA.


Redefine Properties, which owns more than 300 large properties including big malls throughout South Africa and office buildings in Sandton, reported its half-year results on Monday.

Its share price rose by more than 2% on the news that its distributions to shareholders rose by 4% and revenue increased 11%.

But there was one number that shocked Alpha Asset Management fund manager Keith McLachlan: the average rental reversion rate of negative 6%.

A rental reversion rate shows whether expiring leases that were renewed in the past six months had higher or lower rental rates than before. A positive rental reversion rate confirms that higher rental rates were secured.

Over the past six months, Redefine reported rental reversions of -17.3% for its industrial properties,

“That is massively lower,” says MacLachlan. In the previous financial year, the rental reversion was a positive 2.9%.

“It was -6% across their SA portfolio, which is also very concerning.” This indicated that expiring leases that were renewed in the period was on average 6% lower than previously. 

Read: The 10 most expensive streets in South Africa - where the average house costs you more than R20 million

To be clear, this is not for the entire portfolio – just for those properties where leases had to be negotiated. In the past six months, this was fewer than 5% of the total area that Redefine is letting out. 

Still, it sets the bar for the rate per metre and implies that future renewals should start to come in lower as well, warns McLachlan.

“Redefine could have serious trouble just over the horizon.” 

No doubt it will also send a sobering signal to other landlords in South Africa.

In its results presentation, Redefine said a lack of business confidence, as well as growing vacancy rates and increases in rates and electricity prices, are putting pressure on lease escalations.

In its malls, retailers continue to focus on “right sizing” which is driving down rent and escalations. In addition, excess retail space is impacting sales, and fashion retailers are opening shops in smaller, convenience centres – outside of big, expensive malls. 

Redefine also agreed with embattled retailer Edcon to reduce its rent to the amount of R14 million over the next two years.

Redefine, which owns large buildings like Maponya Mall, East Rand Mall, and Blue Route Mall as well as office buildings on 90 Rivonia Road, Alice Lane, Rosebank Link and 90 Graystone Drive, currently has a 5.7% vacancy rate.

Average gross rent across its properties is 116.4m² - which is higher than the previous year 112.3m² - with retail commanding R163.4/m², followed by commercial (R158.9/m²) and industrial (R54.8/m²).  

Its local property portfolio is worth R72.9 billion, of which 73% is located in Gauteng, and 18% in the Western Cape.

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