Happy New Year! The South African listed property sector delivered another superior return in 2025, improving on 2024’s 28.85% total return and finishing the year up 30.74%, marking one of its strongest annual performances since the pre-pandemic period. After several years defined by balance sheet stress, weak sentiment, and persistent valuation compression, the sector again re-rated sharply. This robust performance placed SA listed property among the best-performing local asset classes for the year and ahead of many global REIT peers. The recovery was not driven by a single name or subsector, but by a broad-based rerating across the index, with better fundamentals and positive macro sentiment. Macroeconomic conditions played a central role in resetting investor expectations. Lower inflation and the commencement of an interest rate cutting cycle materially improved the forward earnings outlook for highly geared property vehicles. Just as important was the reduction in perceived country risk. South Africa’s removal from the FATF greylist and the improvement in sovereign credit outlook helped restore offshore investor confidence, eased funding concerns, and supported capital inflows into risk-on assets, including listed property. Modest macro improvements translated into outsized equity returns. Property-level fundamentals also showed tangible improvement through the year. Vacancy rates trended lower across most portfolios, rental reversions stabilised and, in selected segments, turned positive. Industrial and logistics assets remained the clear leaders, benefiting from structural demand drivers and limited new supply. Retail property surprised to the upside, with tenant turnover resilience supporting renewals and containing vacancies, particularly in dominant convenience and community centres. Offices remained the most challenged segment, but office specialists saw the highest sectoral annual total returns. Operational execution and balance sheet repair were critical in converting macro tailwinds into sustainable earnings recovery. Management teams focused aggressively on deleveraging, disposing of non-core or underperforming assets, and tightening cost control. Corporate activity picked up, with selective acquisitions, asset recycling, and internal restructurings aimed at improving portfolio quality rather than purely chasing growth. As funding pressure eased and interest costs peaked, several companies were able to restore dividend growth, in some cases exceeding earlier guidance, an important shift for investors. Performance across individual counters, however, remained highly differentiated. The strongest share price gains were recorded among smaller and previously distressed names, where even incremental operational improvement triggered substantial rerating. At the other end of the spectrum, some companies with heavy offshore exposure or more complex balance sheets lagged the broader rally. Looking ahead to 2026, the key question is whether the momentum seen in 2025 can be sustained. Further interest rate relief would provide additional earnings support, but the pace of recovery is likely to moderate as base effects fade and valuations normalise. The sector appears to be transitioning from a rebound phase into a more conventional growth environment, where operational delivery, capital allocation discipline, and asset quality will matter more than macro relief alone. While risks remain, including economic fragility and funding market volatility, the outlook is one of cautious optimism, shifting SA listed property from a turnaround narrative to one focused on selective growth and income resilience.