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JOHANNESBURG - Octodec, the listed property company, reduced the vacancy rate in its residential portfolio to 3.7percent in the six months to February from 7.2percent at end-August last year, despite the 2017 calendar year being a “terrible year for residential” property.

Octodec managing director Jeffrey Wapnick said yesterday that the company had an overall vacancy rate of between 7percent and 8percent for last year, while it was about 14percent for its properties in Hatfield, Pretoria.

However, Wapnick said this year had been “a completely different story” and the vacant units had been taken up quickly in the first two months and Octodec’s available ones almost fully let by end-February.

Wapnick said the full benefit of the improved vacancies would only be felt in the second half of the financial year as the bulk of the income from letting would have only started flowing in from March.

Wapnick believed the #FeesMustFall campaign was a big reason for last year being a tough year for the residential market.

“It wasn't good for the universities, which suffered from lower intakes. But 2017 generally was not great for South Africa Inc and market sentiment wasn't great,” he said.

“Thankfully, it's turned. That is one of the beauties of residential. I can do with one less shirt or pair of shoes, but cannot do without a roof over my head.”

Wapnick confirmed Octodec had adjusted the residential tenant offering without compromising the recoverability of rentals or other standards in response to the increased competition and changing trends in this sector.

He said this involved not charging deposits in select buildings and introduced a loyalty programme in an attempt to reduce the churn in tenancies.

“If we can do that at the same rental, there would be a significant growth in rental income,” he said, adding that the loyalty programme involved issuing a voucher for one of the big retail stores to tenants who stayed beyond a certain period.

Octodec yesterday reported that its financial results for the six months to February were impacted by pressure on rental income growth, the lagged effect of the letting period at recently completed developments and higher finance charges.

Distributions a share declined by almost 3percent to 101.7cents from 104.8c.

Wapnick said the political and economic uncertainty experienced during the period did not lend itself to a supportive operating environment.

Octodec has a portfolio valued at R12.9billion comprising retail, residential, shopping centres, industrial and office properties, all of which were located in Gauteng.

Like-for-like rental income grew by 3.2percent, with retail accounting for 36.9percent of rental income, residential 30.5percent, offices 20.7percent, industrial 7.5percent and parking 4.4percent.

Net operating costs to contractual rental income improved to 28.3percent from 30.9percent.

Bad debt write-offs and provisions remained unchanged at 1.2percent of total tenant income.

Ten non-core or underperforming assets were sold, with six transferred during the period and returning R43.8million.

The remaining four properties were expected to be transferred in the 2018 financial year and return R44.8m to the company.

Octodec is expecting flat distribution growth for its full financial year, with positive growth in its 2019 financial year.

Shares in Octodec closed unchanged on the JSE yesterday at R21.20.