Property loan stock company Vukile Poperty Fund today reported a 9.6% increase in distribution to R130.3 million or 44.1 cents per linked unit for the six months to September, compared with 40.25 cents a year ago.

Chief executive Gerhard van Zyl said that it is gratifying to note that, during this tough period, the company managed to contain the vacancy levels in the portfolio to 2.9% of gross rentals compared to 2.8% of gross rentals at the end of March 2008.

In addition, new leases and renewals with a value of R251 million were concluded during the review period. The company also noted that expansion projects to the value of R47.3 million had been completed timeously and within budget during the past six months, while major upgrade or capital protection projects totalling R44 million were under way.

The group property portfolio as at end March 2008 consisted of 74 properties with a gross lettable area of 911 907m².

Looking ahead, Van Zyl said the current turmoil in world markets would inevitably have a negative impact on the South African property market.

"Although there are signs that inflation has reached a turning point and that interest rates may start coming down in the first half of next year, there will be a slowdown in economic growth which will in time have a negative effect on rentals," he said.

"The outlook is not all bad, however. Vacancy levels are still very low and there is only a limited amount of new stock coming on to the market. This should ensure that there will be a continuing demand for space, which in turn will support rental levels," he added.

The board is still confident that the company would meet its 2008 annual report forecast by posting reasonable growth in distributions for the full year to March 2009.