Octodec sees a spike in residential leasing in tough six months

OCTODEC Investments experienced an increase in residential leasing activity with reduced vacancies in the residential portfolio during February and March 2022, it said in its interim results, saying it had been a “tough six months”.

The JSE-listed real estate investment trust, which released its interim results for the six months ended February 28, 2022, yesterday said that although there had been a continued downward resetting of rentals across the sectors, it was pleasing to see that, from its perspective, several renewals were being concluded at increased rentals.

“We continue to experience demand from large retailers for space in the Johannesburg and Tshwane CBDs,” Octodec said.

While Octodec’s office sector, predominantly occupied by parastatals and small, medium and micro-sized enterprises was stable, the company said it did not expect growth from this sector in the short-term due to the current oversupply of office space.

Property operating expenses increased by 5.2 percent, mainly due to increased administered costs such as assessment rates. The group’s bad debts remain under control at 1.9 percent of gross revenue compared to 2.5 percent for the prior period.

It also did not anticipate significant growth in the rental income while inflation was expected to increase, impacting costs and, ultimately, its net property income.

“Concerns around global inflation and rising interest rates continue to dominate economic forecasts, and the breakout of the war between Russia and Ukraine has created further uncertainty,” the company said.

Revenue earned on a contractual basis, after Covid-19 rental discounts, rose by 5.1 percent to R944.4 million.

Distributable income per share rose to 79.6 cents from 74.8c. The company also declared a 50c dividend.

In an interview yesterday, managing director Jeffrey Wapnick said: “We just come out of a tough six months operating environment.

“In terms of residential, our residential vacancy at the end of April was 9 percent – substantially down from the difficult times we experienced during the Covid-19 pandemic lockdown.

“In commercial there is a very high level of enquiries from both the bigger mass tenants and to some of the smaller retailers. Things are improving,” he said.

Wapnick said the company was recovering from the Covid-19 pandemic.

“We are starting to see a fall into our vacancies. I think the economy is starting to recover. However, we can’t power ahead without the economy showing some type of improvements, specifically on employment,” he said.

Octodec financial director Anabel Vieira said the company retained a bit of cash when it withheld dividends last year.

“The proceeds we received from selling off some our properties we used to settle our debt.

“As a result we reduced our lease to buy from 43.2 to 41 percent, which I think is a strong move in the current circumstance.

“The economy hasn’t really gained traction yet from the impact of Covid,” Vieira said.

Looking ahead, Wapnick said he was confident that the property sector was poised to enjoy an upstream.

“As the economy returns to normal, hopefully we will be one of the first property companies that would benefit,” he said.