Listed A-REITs outperformed unlisted property funds and direct property in the third quarter of 2021, delivering a 12-month return of 32.6%. 

For the three months to 30 September 2021, unlisted property funds and direct property produced 12-month returns of 17.6% and 8.9% respectively.  

The findings come from data released by Zenith Investment Partners, Australian Unity, MSCI, the Property Funds Association and the Property Council of Australia. 

Listed A-REITs outperformed Australian equities, which delivered a 12-month return of 31.3% for the period.  

“Despite the wave of lockdowns as a result of the Delta variant in Q3, it is very pleasing to see the high vaccine uptake and promise of a return to business-as-usual accelerating growth across listed, unlisted and direct property,” said Zenith Investment Partners Senior Investment Analyst Dan Cave. 

“While last quarter saw listed property matching returns of Australian equities, we have now seen A-REITs overtake domestic equities, thanks to the strong third quarter performance of this asset class. 

“This is a clear sign of local and global investor confidence as Australia comes out of lockdown.  

“Historically low interest rates and falling capitalisation rates have undoubtedly been key contributors to the attractiveness of many listed, unlisted and direct property assets over the 12-month period.  

“While the growth of online retailing and supply chain re-alignment coupled with significant investor interest has positively impacted the industrial and logistics sectors, which saw significant cap rate compression over the past 12-months.”   

The findings showed that the 12-month period in direct property saw industrial and logistics sectors deliver the largest returns, underpinned by rising rents and local and international interest. 

For retail property, rental income rose despite continued lockdowns, contributing to the significant 12-month turnaround of total returns.  

Office property delivered income and capital growth throughout the year, with higher quality assets attracting the most investor demand. 

“Building on a year of resilience and recovery, the third quarter was one of continued growth for industrial assets, a return to stability for retail and consistently strong investor appetite for quality office property,” said Damian Diamantopoulos, Portfolio Manager REITS / Head of Research – Property at Australian Unity. 

“With both NSW and Victoria both out of lockdown and vaccination rates high, there is cause for cautious optimism across the market as we head into the Christmas period.” 

“Despite this, investors must be mindful that certain assets, even in sectors showing growth, will continue to recover at a slower rate.  

“Reduced tourism means some CBD retail assets will still experience short-term subdued trading. 

“Above all, it’s most important for investors in this environment to adopt a diversified investment approach by sector and asset class, whilst also focusing on quality assets with robust leases.”