By Benjamin Martin-Henry on September 9th, 2021
Australian listed property companies reported mixed results for the just-completed financial year, which, considering it took place amid a pandemic, is not wholly surprising. Performance was very much dependent on how heavily weighted the firms were to each asset class and indeed subclass. Funds with higher exposure to the industrial sector outperformed those more geared towards office and retail. Yet, there were some exceptions in the retail space, as funds with high exposure to convenience retail reported strong showings.
The industrial sector continues to thrive, and the allocations that listed players made to the sector certainly attest to this. Investors increased their deployment by 57% or A$1.3 billion (US$1.0 billion) compared to the previous year, marking the third consecutive year of larger allocations to the sector. It was also the least offloaded of the core sectors, as these investors sold only A$745 million of assets, compared to acquisitions of just under A$4 billion. Given the outperformance of the industrial REITs, limited disposal of prized assets isn’t too shocking.
The retail sector has been the very definition of mixed fortunes of late. There have been pockets of outperformance – most notably in the neighbourhood shopping centre space – yet major shopping centre performance has been poor. Investors have noted this distinction and steered clear of larger shopping centres and focused mainly on sub-regionals, large format centres and neighbourhoods.
This concentration amounted to an almost doubling of allocations to the retail sector compared to the previous financial year, the biggest increase of the core sectors. Overall, more retail was acquired than disposed of, leading to a net position of over A$1 billion, as investors appear to be warming to a segment that has undergone more than its fair share of troubles in recent years.
Currently undergoing its own newly-materialised troubles is the office sector. Deployment to the sector declined 46% (A$2.6 billion) year-on-year as uncertainties around the office’s role in workplaces of the future abound. Office property purchases accounted for 31% of total acquisition volume, down from the five-year average of 43%, whereas disposals accounted for 61%, up from the five-year average of 46%.
Similar to the retail sector, there are nuances at play within the office category as well. For example, investors upped their exposure to suburban offices, deploying A$1.3 billion, an increase of 140%. Conversely, CBD office acquisitions fell 65% to A$1.8 billion as investors bet on a long-term shift to larger workforces situated outside of central business areas.
Overall deployment by listed parties decreased 10% on the previous financial year as some investors remain cautious about investment at the current juncture. Firms acquired A$9.9 billion of assets across the property types whilst disposing of a little over A$5 billion, resulting in a positive net position of A$4.7 billion.
© Real Capital Analytics
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