So explains property analyst Leon Allison of Macquarie First South.

“The alternative is to buy other listed property,” says Allison. He explains that there are several deals currently lined up, however all will not necessarily go ahead. “This will depend on whether the shareholders believe the deals make sense.”

Allison points out that the pros of consolidation include greater liquidity. This is especially attractive to international investors which tend to prefer larger, more liquid stocks.

On the down side, consolidation means there are fewer stocks to choose from. “The fewer the stocks the more they tend to reflect the sector and it is often through investment in specialist stocks that additional returns can be achieved,” he explains.

Allison notes that the market moves in cycles with the tendency being for more diversified funds to develop in smaller markets to achieve scale. “As the market grows in scale, there is then a change to more specialist funds as, at this point, specialisation can be achieved without compromising scale,” says Allison.

South Africa is currently in a phase where there is more emphasis on consolidation and this tends to mean bigger, more diversified funds but, points out Allison, in a few years time there could be a reverse trend into specialist funds of a decent size as a spin-off.

Those who are most likely to benefit from the consolidation in the present market include big investors and foreign investors who want South African exposure which is large and liquid.