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Office parks reimagined

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Office parks reimagined: When sustainability meets market leadership

By Samantha Lambert, General Manager, Redefine Properties

In an era of unprecedented environmental and operational challenges, South Africa’s office parks stand at a critical juncture. Energy insecurity, water scarcity, and ageing municipal infrastructure are no longer distant concerns but immediate challenges that demand innovative solutions. Yet, within these challenges lies an opportunity to reimagine office parks as beacons of sustainability and operational resilience.

The business imperative for sustainable office parks

Sustainable office parks are no longer just an environmental consideration; they are a business imperative. Unreliable municipal power supply and recurring water shortages directly impact operational continuity and tenant satisfaction. Simultaneously, tenants and investors increasingly demand spaces that combine operational resilience with environmental responsibility. This convergence of operational necessity and stakeholder expectations is reshaping how we approach office park development and management.

Black River Office Park in Cape Town’s Observatory district exemplifies this transformation. The park’s evolution has been accelerated by significant node activation, including Amazon’s new head office development across the way. This strategic location, with its superior road infrastructure connecting to both northern and southern suburbs, has catalysed the area’s development into what we envision as an emerging Century City-calibre node.

Infrastructure that powers performance

Leading sustainable office parks are distinguished by infrastructure investments that address both environmental impact and operational resilience:

  • Renewable energy systems: Black River’s solar fleet, with an installed capacity of 1,496 kWp supported by 5,715 panels, significantly reduces grid dependence while ensuring consistent power supply.
  • Backup power solutions: A comprehensive backup generator system, coupled with a centralised power plant, ensures business continuity during grid interruptions – a critical feature that’s no longer optional but essential for tenant operations.
  • Water security measures: Strategic use of borehole water for refuse yards and irrigation supports water-wise landscaping, reducing municipal water dependence while maintaining attractive green spaces.

These investments deliver measurable returns through reduced operating costs and enhanced tenant satisfaction. The park’s near-full occupancy demonstrates the strong market demand for sustainable, resilient office space.

The multi-tenant advantage: How diversity drives growth

Sustainability extends beyond utility management to encompass how spaces support diverse business needs. Black River Office Park comprises 14 distinct buildings, each with its own identity, enabling a unique ecosystem where corporate offices and business process outsourcing (BPO) operations successfully coexist. As we’ve discovered, sustainable office parks must be flexible enough to accommodate varying density requirements while maintaining premium-grade standards.

The park’s design thoughtfully incorporates energy-efficient building systems alongside carefully planned green spaces that enhance both environmental performance and user well-being. Supporting amenities promote tenant productivity and satisfaction, while flexible spaces readily adapt to changing business needs.

This approach has attracted a diverse tenant mix, including boutique gyms, award-winning salons, medical practices, and varied food offerings. As a result, it has created a vibrant, community-centric environment that supports approximately 2,000 employees, a number set to double with recent expansions.

Collaboration: The key to sustainable success is collaboration

Achieving meaningful sustainability requires close collaboration among REITs, tenants and vendors. At Black River, this collaborative approach begins with our tenants, working closely with them to optimise space utilisation and resource efficiency. We engage suppliers in sustainable procurement practices while maintaining strong partnerships with the City of Cape Town and CapeBPO to align with regional development goals. Our Red Thread initiative exemplifies this collaborative spirit, repurposing materials from gutted buildings to benefit the community and demonstrate our commitment to circular economy principles.

Smart design, smarter returns

Modern technology plays a crucial role in maximising sustainable infrastructure performance. At Black River, we’re investing in smart building systems for resource optimisation, complemented by advanced monitoring tools for energy and water consumption. Our commitment to continuous assessment of environmental performance drives strategic upgrades that maintain our premium-grade status.

The planned redevelopment of Gate House, which anchors the entry point to Black River Park, illustrates our commitment to ongoing evolution. This project will enhance the building’s exterior while maintaining its distinct character, demonstrating how sustainable design can complement heritage features.

Market leadership through environmental excellence

As South Africa continues to face environmental and infrastructure challenges, sustainable office parks will play an increasingly vital role in our business landscape. The success of Black River Office Park demonstrates that sustainability isn’t just about environmental responsibility; it’s about creating resilient, future-ready spaces that deliver lasting value for all stakeholders.

Property owners and managers must take a long-term view, balancing immediate operational needs with future sustainability requirements. This means investing in robust infrastructure, fostering collaborative ecosystems, and maintaining unwavering commitment to continuous improvement.

The future belongs to office parks that can adapt, evolve and thrive in the face of change. Embracing sustainable practices today not only protects our environment but also ensures the long-term viability of our assets. At the same time, it creates spaces where businesses can flourish for generations to come.

SA REIT Association expects steady sector growth in 2025

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The South African Real Estate Investment Trust (REIT) sector is poised for growth in 2025 driven by improving investor sentiment and property fundamentals, rising consumer confidence and falling interest rates.

According to the SA REIT Association December and January Chart Books, the sector is expected to deliver strong income returns of c.8%-9%.

Itumeleng Mothibeli, Chairperson of the SA REIT Research Committee and Managing Director of Vukile Property Fund Southern Africa commented:

“With the economic recovery, lower interest rates and robust demand for commercial property—particularly in the retail,  industrial and logistics sectors – we anticipate growth in the REIT sector this year. Our members are consistently reporting improvements in property fundamentals and the quality of earnings.”

“Township, urban and rural malls will continue to show resilience, while demand for logistics and warehousing space will remain strong. In the office sector, vacancies are falling as demand increases for smaller, high-quality spaces with features like co-working spaces, wellness facilities and smart technology are a draw card for tenants.”

Mothibeli said the defensive qualities of South African REITs such as their inflation protection, mandatory income distributions, liquidity and diversification advantages make them essential for building resilient portfolios. The predictability of real estate leases and rental income gives REITs a defensive edge, enabling more accurate earnings forecasts and lower share price volatility. REIT dividends are known to hedge against inflation, as asset values and rental rates often rise ahead of inflation.

“The cumulative 75-basis point interest rate cut will support sector growth, reduce borrowing and debt repayment costs for REITs, increase property values and returns for investors and boost distributions,” said Mothibeli.  

Despite the economy’s prolonged stagnation in 2024, Nedbank forecasts modest growth of 1.4% in 2025 and 1.8% in 2026. However, the bank expects fewer interest rates this year.

Nicky Weimar, Nedbank Group Economist commented: “Growth will be driven mainly by firmer consumer spending, supported by rising real incomes, subdued inflation, modestly lower interest rates and the withdrawals of contractional savings through the two-pot retirement fund system.

“Commercial property mortgages are recovering while home loans continue to slow. Nedbank expected both the commercial and residential property markets to improve moderately as the year progresses.”

Weimar stressed that the rapidly changing global landscape would probably deliver stickier global inflation and fewer US interest rate cuts, pointing to high-for-longer risk-free rates and continued US dollar strength. Against this backdrop, the South African Reserve Bank is likely to remain cautious.

Given upside risks to the local inflation outlook from a vulnerable rand, elevated US interest rates and the threat of global trade war, the current rate-cutting cycle is likely to be shallow. Nedbank forecasts only one more rate cut of 25 basis points in July. Consequently, monetary policy easing is unlikely to provide a significant boost to the property market. Instead, moderately faster economic growth in response to easing structural constraints and stronger consumer demand will support a reasonable recovery in the property market, said Weimar.

Gary Garrett, Managing Executive of Property Finance at Nedbank CIB commented: “We saw a significant increase in activity in the sector in the second half of 2024 which we attribute to the stability created by the Government of National Unity (GNU) as well as real evidence of interest rate cuts. We believe that this momentum will continue in 2025 should current economic conditions hold.”

The listed property sector outperformed other asset classes, including equities and bonds in 2024, further highlighting the positive sentiment and investor confidence in the sector, Garrett added.

Greenovate Awards 2024 celebrate student innovation

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Greenovate Awards 2024 celebrate student innovation in sustainability

The 2024 Greenovate Awards have once again highlighted the remarkable ingenuity of South African university students in developing sustainable solutions for the built environment. This annual competition, a partnership between Growthpoint Properties (JSE: GRT) and the Green Building Council of South Africa (GBCSA), challenges students to address real-world obstacles in property and engineering with cutting-edge green thinking.

This year’s awards saw 23 students from eight universities participate, submitting projects that ranged from finding new uses for manganese mining by-products in construction materials to keeping buildings cool inside with biomimicry, the circular economy potential in the construction industry and even making 3D printing more environmentally sustainable. The winners were announced at a gala dinner held at The Galleria in Sandton.

In the engineering category, North-West University received top honours for a project on compact filament production for 3D printing. University of Cape Town (UCT) claimed second place with a project on termite-mound-inspired energy-saving building design, and Stellenbosch University took third with a solution that reduces traffic in the town.

The Property category saw Nelson Mandela University win the top spot with the project on carbon management implementation for quantity surveying professional practice and University of Pretoria took second for exploring the role manganese mining by-products can play in sustainable property development. Two UCT teams took joint took third place with their focus on the impacts of green building certification on different aspects of real estate.

The International Finance Corporation (IFC) Excellence in Design for Greater Efficiency (EDGE) Award was presented to Nosipho Hadebe and Masego Mngomezulu from University of Pretoria for their work on how timber construction in extreme conditions and remote locations impacts indoor air quality.

“In an industry with tremendous power for positive environmental impact that is seeking sustainability solutions, the creativity and passion of these students shines through,” says Engelbert Binedell, Chief Operating Officer of Growthpoint Properties. “Greenovate isn’t just an awards programme – it’s a catalyst, introducing top young talent to cutting-edge sustainability concepts and connecting them with industry visionaries. This is more than career development; Greenovate expands South Africa’ green talent pool for Growthpoint, the property sector, the green building movement and country as a whole. The future of sustainable development starts here.”

“The Green Building Council South Africa is consistently proud to partner with Growthpoint in the Greenovate competition and awards. But more than that, we enjoy our participation as mentors and judges and being part of the celebration during the awards event. The students inspire us with their vision, enthusiasm and innovation. Greenovate is indeed a catalyst towards the actualisation of green jobs in an innovative green economy within the built environment,” says Lisa Reynolds CEO, GBCSA.

Prizes to advance planet purpose

The top three winners of both categories received a share of R142,000 in total prize money, and the Greenovate. Additional prizes included EDGE training and certification and tickets to the GBCSA Convention, which includes opportunities to present and showcase winning solutions.

Advantageously, participants get access to valuable mentorship, networking opportunities and expert-led workshops. They gain access to knowledge and resources needed to turn their research into practical products or services for the property industry. This experience fosters lasting networks and partnerships among participants.

Mentorship from market leaders

This year’s mentors for the property stream included Marlene Senne and Abigail Godsell of GBCSA, Iphendule Ndzipho and Hlologelo Manthose of WSP, Wardah Peters of Solid Green Consulting, Mapula Matlakala of African Bank, and Siphesihle Mankahla of EPMO. Engineering stream mentors included Alex Varughese of GBCSA, Mary Anne Fetcher of Zutari, Makhosazana Mthethwa and Thato Molapo of Solid Green Consulting, Tumanga Qholosha of Blackstone Design Consulting, and Kutlwano Dikgwatlhe of Joburg Water.

A panel of change-making judges

The 2024 judges for the property category included Tsholofelo Makgwa of the City of Tshwane, Jennifer Lombard of GBCSA, Kushinga Kambarami of IFC, Adrie Fourie of Solid Green and Brian Unsted of Liberty2Degrees. Judges for the engineering category included Mike Aldous of MPAMOT, Dash Coville of GBCSA, Werner van Antwerpen of Growthpoint Properties, Mischa Tessendorf of Attacq Limited.

The innovating, planet-shaping 2024 Greenovate Student Awards winners:

ENGINEERING WINNERS:

1st – Leon Uys, North-West University: Compact filament production plant for sustainable 3D printing.

2nd – Jacqui Hully, University of Cape Town: Thermal design and analysis of termite-mound-inspired energy saving buildings.

3rd – Sebastiaan Whitward, Stellenbosch University: An optimist’s solution to Stellenbosch’s high influx of commuters.

PROPERTY WINNERS:

1st – Dylan Minaar, Nelson Mandela University: Exploring carbon management implementation for quantity surveying professional practice in South Africa.

2nd – Liam Galloti and Neil Johnston, University of Pretoria: Exploring sustainable housing solutions in Hotazel using mining by-products.

3rd – Oratile Masia and Mihlali Solombela, University of Cape Town: An examination of the impact of green certification on valuation variables and office real estate valuation determination.

3rd – Paige Waberski and Kiah Wallace, University of Cape Town: The investigation into the impact of the Green Star Existing Building Performance (EBP) tool on the office real estate sector in South Africa.

IFC EDGE PRIZE – Nosipho Hadebe Masego Mngomezulu, University of Pretoria: Indoor environmental quality improvement through timber construction in extreme environments and remote locations.

Students from all South African universities are invited to participate in the Greenovate Awards and can register at https://www.greenovatecompetition.co.za/register/

South African REITs are poised for strong growth in 2025

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The ongoing strengthening of property fundamentals, combined with rising demand and increased market activity, alongside declining interest rates, will position South African REITs for a strong growth trajectory heading into 2025.

The REIT sector, which made a strong recovery in October 2024, has outpaced other asset classes, delivering a 34% return year-to-date. In comparison, the broader equity market has returned 15.9%, while South African bonds have gained 16.7%.

Key factors contributing to this outperformance include the formation of the Government of National Unity (GNU) and a stable power supply, both of which have positively impacted the sector and driven improvements in property fundamentals.

Estienne De Klerk, Chairperson of the SA REIT Association and Growthpoint Properties South African CEO commented:

“In 2024, we have seen notable improvements in key property performance indicators, signalling strong investment potential and supporting expectations for future net rental growth. The anticipation of additional interest rate cuts has further bolstered investor confidence and sentiment, creating a positive outlook for the sector as we head into 2025.

However, the cumulative 50 basis point rate cut so far is not a panacea –  it is essential for stimulating market demand and activity, as well as supporting growth in company earnings. While not immediate, additional rate cuts will support REITs in raising capital, refinancing maturing loans, and acquiring new assets.”

To ensure long-term liquidity and a solid balance sheet, REITs have remained focused on strategically disposing of non-core assets, optimising their portfolios to enhance quality and implementing proactive asset management strategies to increase property values, he said.

De Klerk noted that sentiment in the office sector has strengthened, evidenced by a surge in space inquiries and a decline in vacancies. In coastal regions, demand is now outpacing supply in certain areas as more people return to the office. However, oversupply still exists in Gauteng.

Meanwhile, the retail sector is growing. As consumer sentiment improves, De Klerk expects to see better trading densities and rental growth in 2025. The industrial property sector continues to outperform, driven by strong demand, limited supply and rising construction costs, all of which are fuelling rental growth—this trend is set to continue into 2025.

Sustainability

Shifts in how and where tenants occupy commercial space has resulted in increased demand for sustainable buildings, new and high-quality refurbished buildings across the industrial, retail and office sectors.

REITs have made substantial investments in solar power and water supply infrastructure, continually enhancing their buildings to reduce carbon footprints while offering occupiers high-quality, sustainable spaces to operate from.

For many, sustainability is embedded in their organisational DNA and core business strategies for long-term benefits.

“In November, we launched the SAREIT Sustainability Disclosure Guide to set clear sustainability standards and best practices for South Africa’s real estate sector. We are confident that this initiative will play a pivotal role in supporting our members on their sustainability journeys,” said Joanne Solomon, CEO of SA REIT.

As a key player in addressing environmental, social and governance (ESG) challenges, the guide will provide strategic direction for the industry, helping to shape a future where sustainable practices are seamlessly integrated into business strategies, driving both resilience and long-term value,” she added.

SA listed property sector outshines bonds, equities and cash year-to-date

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SA’s listed property has outperformed bonds, equities and cash year-to-date, and with rate cut expectations, the sector is likely to see further growth in earnings, higher retail spending and share price up-side over time, according to an independent property analyst.

In recent months, the sector has seen a rally driven by the US Federal Reserve signalling an end to the rate hiking season, positive sentiment with the formation of the Government of National Unity (GNU), and the anticipation of interest rate cuts in South Africa.

Keillen Ndlovu, Independent Property Analyst commented: “In global comparison, SA listed property outperformed other asset classes year-to-date thanks to their diversified portfolios whereas globally, listed property with mostly specialised assets underperformed and delivered marginally positive returns of 2.9% in Rand terms.”

Year-to-date to July, SA’s listed property has delivered 14.4% in returns (income and capital growth) compared to bonds (9.8%), equities (10.0%) and cash (4.9%). The sector has recovered from being the worst performer delivering a negative 2.2% over the same period in 2023, said Ndlovu.

Positive outlook 

Joanne Solomon, CEO of SA REIT Association said rate cuts will benefit the listed property sector leading to a recovery in lending and capital markets which may result in increased investment activity.

“Our members are reporting an improvement in property fundamentals – declining vacancy rates, rental increases – albeit off a low base, and demand for space, especially in industrial and logistic, retail and select office assets in key locations.

“We expect property fundamentals and earnings to continue to improve.”

A Real Estate Investment Trust (REIT) is an international standard for property investment, where a tax dispensation ensures a flow-through of net property income after expenses and interest. In 2013, there were 54 real estate listed stocks on the JSE – this figure was down to 46 at the end of the first quarter of 2024.

There are currently 35 locally focused listed property stocks on the JSE of which 29 are REITs and six are non-REITs. There are 11 offshore-focused stocks, of which seven are REITs and four are non-REITs, according to research done by Ndlovu.

Ndlovu was speaking at a recent Unlock the Stock Webinar focusing on the South African REIT sector with market analysts, The Finance Ghost and Mark Tobin.

“I believe that REITs are highly investable at this point in the cycle – investors benefit from a selection of high-quality JSE-listed REITs whose management teams have lived through tough economic cycles,” said The Finance Ghost.

The Finance Ghost said REITs have the potential to perform well from this point onwards given the significant renewed optimism around South Africa and anticipated rate cuts.

Certain REITs appeal to investors in developed countries with growth rates like Spain and Poland as well as developed markets like the UK with lower risks in general.

Ndlovu said that even though REITs earnings will likely decline by 3%-4% on average this year mainly because of higher interest rates, earnings will return to positive territory in 2025 and to inflation-beating levels in 2026.

“If the economy grows faster and interest rate cuts happen sooner and more aggressively, we can see robust growth in earnings earlier than 2026.”

Over the past few years, the sector has seen a decline in equity raised. From raising R69.4bn in 2014, SA listed property raised R7.4bn in 2023. There  has been decent activity so far this year with Vukile Property Fund raising R1bn and Sirius Real Estate raised £150m from SA and offshore investors.

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