Australian core wholesale property funds recorded a negative total return in the last quarter of 2022, but still managed to outperform equities, bonds and REITs over the year.  

MSCI Real Assets found that total returns for Australian core wholesale property funds fell by 0.1% in Q4 amid rising inflation and interest rates and the uncertain economic outlook.  

Office funds recorded a 1.5% decline in total return, driven by a 2.4% fall in capital growth, while industrial funds recorded a total return of 1.2%, closely followed by retail funds at 1.1%. 

On a rolling 12-month basis, unlisted property funds delivered a 6.4% total return, including 1.7% for equities, -16.8% for bonds and -20.4% for REITs.  

Rolling Annual Capital Growth. Source: MSCI

“Whilst it was a disappointing end to the year, it wouldn’t have come as much of a surprise to investors as Q4 was likely to see valuations revised down given the economic environment,” said Benjamin Martin-Henry, Head of Pacific Real Assets Research at MSCI. 

“It’s true that the results indicate that the property market is slowing down, but if looked at in context, unlisted property has performed extremely well.  

“2022 was a rough year for many other asset classes; unlisted property posting a positive return is testament to the sector’s strength.” 

Industrial funds posted a total return of 9.9% in 2022 off the back of solid value increases, culminating in capital growth of 6.1%.  

As a result of another strong year, the industrial sector takes its 3-year annualized total return to 17.1%, by far and away the strongest performance of all the sectors. 

The retail funds performed better than their office counterparts, recording capital growth of 2.1% and an income return of 4.9%, culminating in a total return of 7% for the year.  

Office funds recorded a total return of 4.6%, comprising marginal capital growth of 0.7% and an income return of 3.9%.