Many factors have affected the property sector, including Covid-19 lockdowns and the recent civil unrest in South Africa.
The civil unrest that took place in South Africa in July 2021 left a significant dent in the economy, notably in the property sector. Several shopping centres, industrial properties (warehouses and storage facilities) and educational facilities, located primarily in KwaZulu-Natal and Gauteng, experienced significant trading interruptions due to looting and civil unrest.
During the week of 12 July, the All-property Index (J803) fell by 5% from its highs of the previous week. Reits with retail properties in the affected regions were slow to announce the impact it had on their premises. Most have not yet quantified the damage sustained, given the lengthy cleanup process required. The South African Property Owner Association published preliminary estimates of the damage of an unsettling R50 billion impact on national GDP. The count of retailers’ stores impacted and damaged stood at 1 787, including 200 shopping centres, excluding vehicles.
The extent of insurance cover across the retailers and landlords will be company-specific as some may have reduced cover to cut costs amid the pandemic. Landlords are challenged by both the foregone rent for the period that properties are repaired, as well as costs for the repairs (to the extent not covered by insurance or Sasria).
Property owners who suffered severe damage during the unrest are entitled to some relief as municipalities are obliged to adjust valuations of affected properties according to legal provisions. These reassessments of valuations will be informed by the extent of the damage and the expected time to repair the properties. Once repairs are completed, properties will be revalued again.
Sasria appears to have extensive catastrophe reinsurance in place that is triggered for events where damage exceeds R500 million. This reinsurance is placed with large, global reinsurers, including Swiss Re, Lloyds, Hannover RE, Munich RE and SCOR Africa.
The outlook for the property sector over the medium to long term remains opaque as it is dependent on the amount of time it will take to restore buildings and tenant trading back to historic norms.
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