Abstract
Stock market volatility is often a good indicator of global crises and general uncertainty. The
uncertainty created by the outbreak of the Covid-19 pandemic has been equated by
researchers to the ramifications of the 1918 Spanish Influenza (Flu) Pandemic, the Great
Depression and the Global Financial Crisis in severity. The outbreak of the virus, and
subsequent classification as a pandemic by the World Health Organization (WHO),
necessitated rapid action from world leaders in attempting to contain the spread of the virus
to ensure the health and safety of citizens.
South African leaders reacted similarly, and a national lockdown was announced by President
Ramaphosa on the 23rd of March 2020. The lockdown resulted in the forced closure of all nonessential
goods and service providers and forced all citizens, except the providers of essential
goods and services, to remain at home. The prohibition of the use of non-essential
commercial, retail and industrial space directly impacted the ability of tenants to generate an
income and, in turn, that of landlords to collect contractual rental.
This study examines research on the impacts of the pandemic on real estate investment trusts
(REITs) globally and determines that the impact on South African REIT returns has not been
quantified to date. This study comprises two components to quantify the immediate impact
and the longer-term impact of the pandemic on South African REIT returns. An event study
found that the announcement of the national lockdown by President Ramaphosa resulted in
statistically significant abnormal returns being generated by the Johannesburg Stock
Exchange (JSE) REIT Index. A panel data analysis found that Covid-19 statistically
significantly affected South African REIT returns and that the magnitude of the impact was a
2% decline. The results of this study provide information that shareholders, management
teams and debt providers could use to ensure that REIT balance sheets are sufficiently robust
to ensure sustainability during periods of uncertainty.
Key words: Covid-19 pandemic, share price volatility, real estate investment trusts (REITs),
South Africa, JSE REIT Index, event study, panel data analysis.