ARTICLE · 09 JULY 2014

Australian real estate investment trusts (AREITs): forecast

Moore Australia

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On balance, we believe better value lies elsewhere but expect AREITs to be well supported while interest rates are low.

AustraliaStrategy

Haris Argeetes

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Overview

The ASX 200 AREIT Accumulation index rose by 11.06% over the year ending 30 June 2014.

S&P ASX200 AREIT Accumulation

Outlook

The outlook for key property sectors is as follows:

Office

Data compiled in January 2014 confirm CBD office vacancy rate increases in Sydney (9% of floor space), Brisbane (14.2%) and Perth (9%). Melbourne recorded an improvement (8.7%).

An increased level of new space enquiries since January should help to stabilise vacancy rates although rental growth is likely to remain subdued given the excess supply that needs to be absorbed.

Nevertheless we expect valuations to remain reasonable given investor demand for yield and the developing trend of converting non-performing office space to residential (especially in Sydney and Melbourne).

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