Office A-REITs outperformed all other sectors in 2011
The market capitalisation of
The A-REIT sector is further comprised of four sub-sectors. The diversified sub-sector contains A-REITs such as GPT, Stockland and Mirvac. These funds comprise assets that include any combination of retail, office and industrial and may also have significant exposure to other asset classes such as residential development or retirement. The retail sub-sector is dominated by the two
The office sub-sector outperformed on a total return basis in 2011, as shown in chart 2. While all office A-REITs provided positive total returns, Charter Hall Office REIT was the strongest performer driven largely by the expectation of privatisation. The 2011 retail sub-sector total return was driven by Westfield Group’s underperformance as American consumers slowed spending and muted rental growth prospects in its domestic portfolio weighed heavily.
The prognosis for A-REITs in 2012 is positive. Partial closure of a persistent and material gap between price and underlying asset values will provide positive returns. Diversified A-REITs with portfolios aligned to the residential markets are expected to provide positive returns commensurate with the ongoing supply shortfall and the anticipated modest recovery in housing markets later in 2012. Net office space absorption in a market without excess vacant space is expected to provide positive growth among the office A-REITs.
| Total Returns - A-REITS 2011 |
|
| ||
| A-REIT Index | Diversified | Retail | Office | Industrial |
Sub-sector | -7% | 2% | -9% | 22% | -5% |
Retail A-REIT performance will be dominated by the Westfield entities. Retail turnover growth is muted. Rental growth in
Industrial A-REIT performance will be determined by Goodman Group, with positive prospects despite its exposure to European development activities.
Mark Wist is senior asset consultant at Atchison Consultants.
