By Niksha Singh, Technical Director, BlackPeak Energy

Sustainability is no longer a checkbox exercise or marketing footnote. It has become a primary driver of risk mitigation and value creation across the South African real estate investment trust (REIT) sector.

As we stand in 2026, the convergence of geopolitical instability, regulatory deadlines and tax escalations has created a conundrum for the sector, one that demands strategic sustainable thinking with energy efficiency as its foundation.

The global energy shock

The global energy landscape is under immense pressure from the ongoing regional conflict in the Middle East. Disruption to oil and gas flows has created significant supply shocks, leading to surging diesel and fuel prices globally. South Africa’s oil refining capacity has diminished over recent years, further exacerbating our reliance on costly fuel imports. South Africa imports more than 70% of its fuel from the Middle East, creating a significant risk for security of supply. For South African REITs, this energy disruption has immediate domestic consequences:

• Rising operating costs: Higher fuel prices are pushing up logistics expenses and increasing the cost of running diesel generators that many buildings still depend on for backup power. This remains particularly relevant as Eskom still relies on its Open Cycle Gas Turbines, which run on diesel, to manage peak demand on the grid, meaning the risk of load shedding and the associated need for backup power is once again a real possibility.
• Business continuity: Energy insecurity has shifted the green transition from a “nice-to-have” environmental goal to a mandatory survival strategy to ensure business continuity.
• Shifts in tenant behaviour and asset use: High fuel costs may drive “unintended” shifts in asset usage, such as a resurgence in remote working as commuting becomes a financial burden for tenants.
• Economic stagnation: The International Monetary Fund (IMF) has already cut South Africa’s growth outlook for 2026 to just 1%, largely linked to the energy shock.

Beyond the EPC deadline

The Energy Performance Certificate (EPC) compliance deadline lapsed on 7 December 2025 and was not extended, sending a clear message from government that sustainability and energy efficiency are top priorities. The focus for REIT boards must shift from mere “checkbox” to performance optimisation. EPCs have introduced a level of transparency and energy benchmarking that the South African market previously lacked, rating buildings from A to G based on energy intensity.

For REITs, these certificates are becoming more than just a regulatory requirement; they are becoming proxies for asset quality and tools for energy management. As seen in the European Union, higher-rated buildings are increasingly attracting premium tenants and institutional investors who prioritise ESG (Environmental, Social and Governance) commitments. A poor EPC rating is no longer a private matter. It is a public signal of operational risk and future capital expenditure requirements.

The strategy: Optimisation before generation

A common pitfall in the current environment is the rush to install large-scale solar photovoltaic (PV) systems to manage energy insecurity, without first addressing the underlying energy demand. The “efficiency-first” principle is vital here. An Energy Performance Certificate allows REITs to benchmark a building’s energy efficiency and identify opportunities to reduce consumption. Additional benefits include:

• Sizing for success: By implementing lighting retrofits, HVAC upgrades and Building Management Systems (BMS), REITs can reduce their baseline energy demand.
• Reduced capex: A more efficient building requires a smaller, less expensive solar and battery storage system.
• Faster ROI: Combined efficiency and renewable projects are delivering faster paybacks while simultaneously increasing property appraisals.

The economic pull and the carbon tax and 12L incentives

The financial case for “efficiency first” is being bolstered by two distinct fiscal levers:

• Rising carbon taxes: As carbon tax rates continue their scheduled ascent, the cost of “doing nothing” is rising. Every kilowatt-hour saved is now a direct hedge against increasing tax liabilities. Carbon tax liabilities are imposed on organisations that exceed the minimum stipulated emissions threshold. While it is currently aimed at heavy industry, the threshold may be adjusted at any time, increasing the risk to REITs in the future. Understanding a REIT’s carbon footprint is therefore essential to gauging its future tax exposure.
• Extended Section 12L incentives: On the flip side, the extension of the South African Revenue Service (SARS) Section 12L energy efficiency tax incentive to 2030 provides a significant window for REITs to recoup capital. By verifying energy savings through a formal Measurement and Verification (M&V) process, companies can claim a deduction of 95c per kilowatt-hour saved. This incentive effectively turns energy efficiency from a cost centre into a tax-efficient investment.

Sustainability is a board-level priority

Sustainability reporting is no longer a task for the facilities manager alone; it has become a board-level priority. Investors are demanding granular data on carbon footprints and climate resilience.

The message for the South African REIT community is clear: energy efficiency is the foundation of a resilient energy strategy. By starting with an audit, securing an improved EPC rating and tapping into incentives like Section 12L before investing in renewables and electrifying, the sector can transform the current energy crisis into a long-term competitive advantage.

BlackPeak Energy is an Advisory Member of the SA REIT Association, partnering with the sector to advance energy efficiency, sustainability and compliance across South Africa’s listed property landscape