Growthpoint reports continued deterioration in negative reversions upon renewal of lease agreements

growthpoint reports continued deterioration in negative reversions upon renewal of lease agreements

Sumary of Growthpoint reports continued deterioration in negative reversions upon renewal of lease agreements:

  • A negative reversion means that, when a lease agreement has to be renewed, the escalating rental stipulated in the contract which came to an end, has likely ended up way above current market levels.
  • Getty Images Growthpoint, South Africa’s largest real estate investment trust (REIT), is having to accept lower rentals when renewing tenants’ commercial property lease agreements.
  • Growthpoint, South Africa’s largest real estate investment trust (REIT), is having to accept lower rentals when renewing tenants’ commercial property lease agreements, it said in an investor update for the three months ended 30 September.
  • According to Growthpoint, challenges in South Africa continue to be the effect of the Covid-19 pandemic and persistent electricity disruptions, as well as factors specific to the commercial real estate sector, such as work from home and online retail.
  • The group expects property fundamentals in SA to remain under pressure for the rest of the 2022 financial year.
  • Office sectorGrowthpoint’s office portfolio saw a lease renewal success rate of 56.6%, with the average lease renewal term decreasing to 2.8 years from 4.4 years as tenants remain reluctant to commit amid uncertainty.
  • The oversupply of space in the market puts pressure on occupancy levels and rental renewal growth.
  • Rental growth on renewals has decreased for the last six years and continues to face downward pressure.

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