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9 May 2024
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It's no secret that Australian commercial property has endured its most challenging period since the GFC. Yet, there are encouraging signs that the worst may be over and industry returns should improve in the medium term.
Charter Hall's Steven Bennett talks through commercial property's challenges and opportunities, Schroders' Rainer Ender on private equity's bright spots, and Peter Warnes on how RBA hawkishness will impact rates and the economy.
Rising interest rates have hammered ASX property REITs, many of which are now trading at large discounts to their net tangible assets. Are A-REITs a major contrarian opportunity or another market value trap?
Parts of commercial property are facing challenges from changing work habits, but in Industrial and Logistics, it's the opposite. Growth in online retailing and shortage of facilities is driving demand and rents higher.
Industrial property has had a stellar run but there should be more outperformance to come. Demand, thanks to online retailing, remains strong while supply is limited by a lack of development land and infrastructure.
A collection of interviews with financial markets experts on investing, superannuation, retirement and other topical issues, as published by Firstlinks over 2021 and 2022.
Most people are returning to their offices, often three days a week with flexibility. The trend to premium offices supports health and lifestyles, while office designs focus more on collaboration and social spaces.
Commercial real estate still offers good yield pickups versus bonds, but some sectors are better positioned than others. What types are resilient in the face of rising inflation and interest rates?
The pandemic profoundly impacted the way we use real estate but in a post-pandemic environment, tenant preferences and behaviours are now providing more certainty to the outlook of our major real estate sectors.
Commercial real estate has historically provided a solid hedge and performed well in periods where inflation has increased against the backdrop of economic expansionary periods. What happens as interest rates rise?
The Industrial and Logistics sector, via the ongoing rise of e-commerce, has demonstrated resilience through the global pandemic and has become a hot topic amongst both domestic and global investors.
Globally, demand for quality industrial property has driven the strongest period of growth the commercial logistics sector has experienced in many years, but what's happening with office and retail sectors?
The gap between property yields and bond yields is known as the ‘risk premium’, the excess yield from investment in commercial property. The high yield spread signals limited downside to commercial property values.
Employees value WFH flexibility but they also enjoy and benefit from the office environment. Businesses will need to adapt but tenants say office work remains essential for productivity, culture, risk and driving innovation.
As people stayed home during the pandemic, a bearish view swept over most property sectors, but many have thrived and prices have recovered rapidly. The best opportunities are in long leases with quality tenants.
The concept of 'activity-based working', where several people occupy one seat on a particular day, is gone. Businesses will need more space for the same number of people as an offset to the decline in demand.
Many property trust results are better than expected, with the A-REIT sector on a dividend yield of 4.8%. But there's a wide variation by sector and the ability of tenants to pay the rent.
Although most office workers are currently WFH, an energy and a buzz comes from working in the same physical space. Other benefits include team building, relationships, talent mentoring and creative collaboration.
Retail assets, particularly those focused on discretionary shopping, will continue to underperform and industrial and logistics assets will be the winners for the foreseeable future.
In this 'lower for longer' rate environment, investors are recalibrating expectations of the required return from high-quality real estate, and foreigners are targetting Australia.
Property funds are finding new assets in companies making better capital management decisions by selling their properties and leasing them back. It also gives investors strong long-term returns.
Investors should not assume all property leases are the same, and long WALE funds have the advantages of tenant quality and term, plus look for the highly-desirable 'triple net leases'.
The listed property market, or A-REITs, is far from homogeneous, with low rates and industry trends producing winners and losers. There's more to investing here than chasing property yields.
Listed Australian Real Estate Investment Trusts (A-REITS) had an excellent FY19, but performance was dominated by a few sectors, and the question is whether they can deliver again in FY20.
With a vast array of property choices across retail, industrial, office and commercial, where does the head of one of Australia's largest property managers see the best opportunities, and where are the warnings?
Property is not a homogeneous asset class, and changes in consumer spending habits are creating both opportunities and problems in different property sectors.
Melbourne and Sydney rank well among Asian commercial property markets, with relatively high yields, constrained supply and changing use of industrial property driving demand.
As interest rates remain low and foreign buyers come looking for assets, listed property has performed well, but asset allocators can move in and out of the sector based on other factors.
Sovereign Wealth Funds control hundreds of billions of dollars of investments, and how they change their asset allocations can affect prices across listed and unlisted markets.
New technologies are transforming the property industry. While many have recognised this trend, they haven’t yet developed a business strategy based on this transformation.
Non-residential real estate performed strongly in 2017, but much of this return came from cap rate (yield) compression. Going forward, investors will need to focus more on income growth and sector allocation.
I like to learn from history, but also look into the future. The articles chosen provide some of the essentials of good investing, but they also peer over the horizon on what the future might bring.
There is more to listed property than the top eight in the A-REIT Index with many strong performing smaller trusts outside the top 80% of the index, and other A-REITs not even included in the index.
If retailers and shopping centres are to survive the online onslaught, they need to return to Victor Gruen’s original vision of malls as community centres, rather than focussing only on sales and consumerism.
Successful affordable housing initiatives in the UK and indications from Australian institutional investors that they would invest in a similar scheme here are encouraging developments.
It's easy to criticise governments for a lack of action on social issues, but here's better news on the potential to grow affordable housing using the capital markets.
A-REITs have been particularly hard hit by bond rate increases, but most are in much better shape than they were during the GFC. Investors should assess the improved value, but not all listed property trusts are equal in quality.
The seniors accommodation sector offers opportunities for investors willing to take a long-term approach, as the population ages and demands a wide range of different types of facilities.
Part 2 of this two-part series on unlisted real estate funds, or syndicates, looks at gearing, how returns are generated, and the different types of exit strategies.
Part 1 of this two-part series on unlisted real estate funds, or syndicates, explores their characteristics and most importantly, how the Net Tangible Asset calculation can be misleading. Every syndicate is unique.
Given the strong returns from most real estate markets in recent years, investors are asking whether there is more upside potential in this cycle, and what is likely to do well.
Demographic and social changes, longevity, cash-strapped governments and higher density living are all driving a shift towards investments in real estate social infrastructure. Here are some risks and benefits.
Amid the ups and down of the current A-REIT reporting season, the listed real estate sector performed relatively well, and most managers have not been tempted to boost returns by increasing gearing.
Despite having one of the world’s largest pools of capital through the superannuation system, Australia’s institutional investors, including listed trusts, have shunned investment in private rental accommodation.
Non-residential property has been a key beneficiary of the hunt for yield, and for good reason. The lure of high and relatively stable income is driving investors to bid up property prices.
Sydney house prices were up 14% in the year to March 2015. What's making the market so strong, how much longer can the growth persist and will it ultimately end in tears? Unfortunately, there are no simple answers.
Financial leverage is already built into many real estate funds and companies, and borrowing even more to invest can produce spectacular results - on both the upside and the downside.
Amid the growing popularity of ASX-listed real estate investment trusts as a way for investors to gain exposure to real estate, there is a debate over what style of fund is best. While passive is cheaper, what's the case for active?
Securitisation and the increased sophistication of the real estate industry have led to new ways to repackage property assets as investment opportunities - each with vastly different risk, return and liquidity features.
Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.
How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.
Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise.
The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.
Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.
Debates about retirement tend to focus on the financial aspects: income, tax, estates, wills, and the like. Less attention is paid to the psychological challenges of retirement, which can often be more demanding.