office reits australia

AFIC is about 20% banks and Argo is about 17% and reducing. But I have no intention of buying this ETF at current prices. That said, even prime-grade office AREITs not immune to the challenges facing the sector. Forecast yields for major funds, such as Dexus, which has an office portfolio of more the $23 billion, 96 per cent occupancy and average leases of more than four years, are about 5 per cent. Im struggling to find any info? Australian office REITs to feel heat from workplace changes, says Fitch Ratings, Amid pandemic pain, Vicinity Centres turns towards retail tech to drive revenue, Asia-Pacific office REITs face mixed fortunes in wake of pandemic, says S&P, BWP Trust projects no change to distribution for 1H 2023, Dexus Industrial REIT divests Knoxfield assets at discount, Cromwell European REIT divests Italian asset at 14.6% gain, AmanahRaya REIT disposes Langkawi resort to reduce gearing, Volare ups stake in Sabana REIT amid ongoing tussle with Quarz, CapitaLand Integrated Commercial Trust sees SGD8.2 million outflow of institutional funds, Sabana REIT highlights risks of Quarzs overly simplistic proposals, ESR-LOGOS REIT divests seven assets to pare down debt. Office REITs listed in Australia are beginning to see challenges that have arisen from a change in how tenants work post-COVID-19. Thanks to low and falling interest rates, REITs have had a tailwind for a number of years. Download Report. Cheers! As youre researching, see how the REIT fared during COVID to see how vulnerable (or not) t may be to future shocks like this. It has been quoted by some brokers at 40% over valued. Its important to check this out to get a feel for the likely rate of earnings/dividend growth. Australia's office market is facing cyclical and structural threats. Ultimately, ratings stability is determined by the willingness of issuers to defend their financial policy frameworks. I top it out at 10% of the portfolio (although my REIT exposure is higher than this when I factor in HPI, BWP, VAS, AFI and MLT). Users are advised to check with the respective bourses and listed securities should there be a need need to verify any information. THE Centuria Office REIT (COF) has sold a #Canberra #office #building for $23 million, at a 1.7% discount to book value, while the trust has completed a $225 million . Thanks for the support! S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Selina Short, EY managing partner for real estate and construction. The regular compounding power of dividends paid quarterly is particularly appealing for many investors, myself included Keep up the great work. Different sectors will perform better/worse at different times. Thats why a diversified portfolio is the best move, which the LICs have. But I wouldnt personally invest in VAP (as it currently exists) for two reasons: The fund owns property developers and property fund managers, as well as traditional REITs. This offers higher certainty around future earnings and income for the REIT and the investor, while being a hedge against inflation. As for the longer term, the industry has declined 25% in the last year. If you look over the longer term (20 years+) the property index has shown similar returns to the ASX300 from memory (could be wrong). Hi Dave, Hey Ivan, thanks for the comment. In the report, Fitch noted that office valuations across the country for the financial year ended in June 2021 were relatively stable compared to FY20, with only slight reductions in capitalisation rates across the REITs. The residual is added to the current vacancy. Like most REITs, Aventus looks to add value through sensible acquisitions and re-positioning its current portfolio to its highest use. Distributions often come with a tax-deferred component, which means an investor will only pay tax on some of the income (this also reduces their cost base for tax purposes, resulting in higher capital gains tax later). CapitaLand Integrated Commercial Trust to list 3.938% notes due 2030, Parkway Life REIT redeems 0.57% notes due 2023, CDL Hospitality Trust takes on SGD120 million sustainability-linked facility, Total returns of Asia REITs worsened in May 2023 according to Global Property Research indexes, Vicinity Centres divests 50% stake in Broadmeadows Central, Keppel DC REITs current chief investment officer to take on role as CEO on 28 July 2023, Fortune REIT unitholders overwhelmingly approve buy-back mandate at AGM, Lippo Malls Indonesia Retail Trust to skip dividends issue on SGD120 million perpetual securities, Starhill Global REIT fully redeems 3.4% notes due in 2023. Creating Freedom Through Financial Independence. | For enquiries regarding your investment in COF (formerly CMA), including unit holding or contact details, please login to the Centuria Investor website. Corporates have begun to adjust and downsize their office floorplate requirements as employers and staff embrace flexible working practices. A REITs purpose is to own and manage a portfolio of real estate for the benefit of shareholders (also referred to as unitholders). Commercial office REITs are one which owns and manages the office premises or building in some central part of the area or industrial area, which they lease to the tenants for the rental income depending upon the size of the area rented to the tenants. Self-storage REITs develop storage spaces of various shapes and sizes and then rent them out to collect an income. Gearing these the same as commercial which yields 5-7% simply makes no sense. They have a decent spread of tenants including Nick Scali, Harvey Norman, Bunnings Warehouse, Baby Bunting and many more. No nonsense. National Storage has been expanding its portfolio in recent years with over 35 centres either built or acquired throughout FY 2019. Someone owns those well-located income-producing properties, where people fill up with petrol and grab some food or coffee! ", Damian Diamantopoulos, portfolio manager REITs and head of property research at Australian Unity, says: It is clear to us the office will remain central to business and office property will remain a key sector for commercial property investors.". We strive to deliver timely and accurate news, data and information on REITs and property trusts listed globally. Disclaimer: I am not a financial advisor and do not hold a financial license. VAP return = 10.75% p.a. We expect demand for office space to evolve as tenants progressively adjust and recalibrate their office floorplate requirements when lease expiries approach. However, the expected declines in structural demand for office space with the nature of the workplace changing are beginning to emerge, said the agency. Industrial/Office REITs Stocks. Total returns for public traded office AREITs declined about 15% over the past 12 months (ending Dec. 31, 2022) despite returns for unlisted AREITs increasing (see chart 3). Tenants comprise primarily companies listed on the Australian stock exchange (ASX), large multinationals, and government tenants with minor exposure to small businesses. As for the next few years, earnings are expected to grow by 2.7% per annum. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. The company leases . Fitch Ratings-Sydney-29 June 2023: Office valuations will be the key focus in Australian REITs' results for the financial year ending June 2023 (FY23), as the sector grapples with uncertainties and structural changes amid the rise in flexible working . S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. So buying shares in VAS, for example, means around 8% of your savings are going into various real estate investment trusts. Thanks Dan. Further, most of the major office REITs increased incentives to tenants, and this will weigh on effective rents going forward, Fitch posits. Gotta love that regular income stream . Shane Oliver, AMP Capitals head of investment strategy and chief economist, suspects the trend towards more space for office workers will be offset by a reduction in overall space because more people will be working at home. Just genuine ideas and long term strategies that work. Centuria Industrial REIT (ASX:CIP) Owns a portfolio of 45 industrial properties around Australia worth in excess of $1 billion. But the private and illiquid nature of unlisted assets may support information and pricing asymmetry. Prospective tenants that are shrinking their office footprint and were previously priced out of prime-grade office towers may look to reposition to higher-grade and refurbished office buildings with better green credentials. As long as the investment is decent is should increase in value over time anyway. During the global financial crisis, prime-grade asset values in Australia declined on average about 25% from peak to trough between March 2008 to September 2009, according to Colliers. Only technology stocks performed worse, down 34.8 per cent, in a year in . Centuria Capital Groups development division has reached a significant milestone with the topping out of its boutique $42 million A-Grade office building in the heart of Adelaides CBD. Great write-up, thank you! People are going back to their offices, rents are coming back and prices in the listed market are more competitive. Most companies youll see in the residential business are developers, not long term investors. The Trust specializes in real estate sectors including industrial, healthcare, decentralized office, agriculture, large-format retail . We believe this trend of a "flight to quality" will persist and offer protection to landlords with purpose-built, refurbished, prime-grade office buildings. Industrial or retail). I dont think theres a right or wrong allocation, so everyone has to make up their own mind. Cyclically, new supply is hitting at a time of higher inflation and weakened business confidence. If you work in an office, theres a chance the building is owned by a real estate investment trust. Strong employment growth and returning office workers provide positive tailwinds. Great summary on the A-Reits. This is an opportunity. Well also look at what to look out for when youre considering investing in REITs. Key office funds include Charter Hall Long WALE, Centuria Office, Dexus Property Group, Abacus Property and GPT group. Angel operates without an office with a staff spread from Bundaberg, which is more than 360 kilometres north of Brisbane, to Albury-Wodonga, on the Victorian-NSW border. This was the assessment provided by Fitch Ratings in a recent report on the Australian REIT sector. So, you get the idea by now there is no shortage of options out there! Key tenants include Woolworths distribution centres, Visy packaging, Australia Post and Toll logistics. Big difference! Office real estate investment trusts (REITs) own, manage, develop, and rent office space leased to various tenants. Like any management team, they are human and will make errors from time to time. Still too high at 20 but slowly working it down. As a Barefoot Investor member I have been a fan of REITs for years, although he has gone cold on RFF lately he still recommends several others, provided they are the right (conservative) price. I have been looking into REITS the last few weeks. REITs structure their leases to include mandatory rent increases each year. Especially those who want some diversification but also like getting a decent income from investments. By the way, if youre interested in the spreadsheet I use to keep track of my annual dividend income over the years, you can download a copy of it below. I compared VAS with VAP this morning. Dexus and diversified property group, GPT have recently been selling assets. Throughout a five year period of proactive asset management, Centuria Capital has greatly improved the sustainability of its office building located at 1 Richmond Road, Keswick, South Australia. Landlords holding material lease maturity profiles, which are concentrated in the near-term and not evenly laddered over the longer-term, are susceptible to shifts in demand. In this note, Dion Hershan, Head of Australian Equities, looks at the outlook for the domestic office real estate market. As a result, certain business units of S&P may have information that is not available to other S&P business units. Australian Unity and Centuria Capital are among the managers offering specialist funds. var e = document.createElement('script'); On the other hand, higher inflation will mean higher rent rises coming through over the next year or two (many leases are linked to CPI), which will counteract the rate rises somewhat. Im 30 at the moment, super makes up around 15% of total net worth. Such companies include Charter Hall, APN Property Group and Centuria. This was shown at the height of the pandemic, where some AREITs reduced or suspended distributions, raised equity or hybrid capital, or cut non-essential capex and development spend, and limited or delayed slated acquisitions. At the end of the day, its a personal choice whether to invest directly into REITs or not. The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes. Office assets that are positioned to enable and support evolving requirements remain sought after. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. Many were highly leveraged with loans which they couldnt refinance when credit seized up during the GFC. Is a perfect storm brewing in Australia's Office REIT sector? Key tenants include Woolworths distribution centres, Visy packaging, Australia Post and Toll logistics. Most of the portfolio is in the Eastern states. COF has a young portfolio with the average age of buildings being approximately 17 years old. On March 31, 2023, we took various rating actions on eight U.S. office REITs on deteriorating fundamentals and near-term cyclical risks. Currently trading on a dividend yield of 5.6%. Commercial real estate has huge economic value, and much of it is not available for investment on the stockmarket. For example, if 10% of leases are maturing in the next year, we assume that 6%, 7% and 8% are renewed under the new respective scenarios. A large proportion of buildings are leased to blue-chip tenants such as governments, multi-national and ASX-listed companies. Centuria Office REIT (ASX:COF) offers investors a chance to invest in commercial property via a real estate investment trust (listed property trust). It currently trades on a dividend yield of 4.5%. Or just letting it run the dividend payout is now about 9% on the original price which makes it hard to decide what to do. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. Youll see more info about me in this post. Right now, Aventus trades on a dividend yield of 5.8%. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENTS FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. Things are recovering now, but this is a new risk that wasnt on anyones radar before. thanks for the re visit Dave! document.body.appendChild(e); I have set VAS to DRP and with VAP I bought in the dips five times. { The most common commercial property were all familiar with is Retail. I wish you published a week earlier as I just sold some SCP to buy VAP! Hi Larry. Rent collection for office properties within our rated office REIT portfolio has remained relatively high (average of 96% in U.S. in April 2020) despite many office buildings having sat virtually vacant (from government shelter-in-place orders) during the months of April and May. Office REIT Stocks List Australia 2023 (ASX) This article presents the list of the Australian companies which are categorized under the Office REIT subsector or have business operations under this segment, and whose shares are publicly listed on the Australian stock exchanges (ASX). e.setAttribute('src','https://assets.pinterest.com/js/pinmarklet.js?r='+Math.random()*99999999); VAS return = 13.47% p.a. By now youll recognise there are REITs for every possible category of property! Many A-REITs specialise in a particular commercial property sectors, usually falling into one of these categories: Office: investing in office buildings ranging from premium towers in the central business districts of major capital cities, to suburban office parks. The largest REIT on the ASX - by far - is the Goodman Group, with a market cap of $42.74 billion. All that matters is what happens with those two investments from todays prices going forward. Country. What we know is that businesses and office owners must consider how the crisis will reshape the relationship between people and place. By Marc Rapport - Jun 21, 2023 at 8:15AM Key Points Office owners have been hammered as remote work continues to. Ive looked occasionally but its not something I worry too much about. If you are calling, please have your Unitholder Number ready to quote. So, even REITs with good leases may struggle to grow their dividend at the rate you expect, if rates were to begin rising. In the report, Fitch noted that office valuations across the country for the financial year ended in June 2021 were . For most of us, REITs are relatively easy to understand and can provide a high yield in a low interest rate environment. Heightened interest rates are an overall drag on the economy, and have led to rising financing costs and increasing capitalization rates for office REITs. Thanks Scott! Get my latest content and thoughts straight to your inbox. COF is Australia's largest pure play office REIT (A-REIT) and is included in the S&P/ASX300 Index. By the way, excuse me if its already mentioned somewhere, but how old are you, and what is your allocation between personal holdings and super funds holdings? In contrast, Dexus Convenience Retail REIT (ASX:DXC) has a WALE of 11.4 years. Effective rental growth is trending upward for premium-grade assets (see chart 2). Office REITs are investments pertaining to owning, managing, developing, operating, and/or leasing office buildings. As for Centuria Capital Group ( ASX: CNI ), which runs the above 2 real estate investment trusts (REITs) as well as investing in unlisted . Despite occupancy remaining above 90% for Australias major office REITs, with most still above 95%, there were declines of between 1pp and 3pp year-on-year, the agency noted. /ratings/en/research/articles/230529-prime-assets-will-help-shield-australia-s-office-reits-from-rising-stress-12741579 I basically wont buy VAP unless the price sinks to about $75/ share. Theme: Newsup by Themeansar. Register now to access exclusive content, events, tools, and more. Only time will tell and it depends on your personal goals I suppose. Centuria Office REIT: COF: Units: 10/12/2014: Cromwell Property Group: CMW: Stapled: 1/02/1973: Charter Hall Education Trust: CQE: Units: 1/05/2003: Charter Hall Retail . Real Estate (86) One issue is supply, as new developments delayed during the pandemic reach completion. As a lease expires, if the tenant doesnt renew, that leaves the REIT with no income from that property. Some emphasize specific classes of tenants, such as government . Exchange. COF benefits from Centuria Capital Group being a hands-on, proactive manager, with in-house property and facilities management and deep leasing capability. **Includes associates of Centuria Capital Group. This was the assessment provided by S&P Global Ratings in a recent report on the sector, which focuses on seven office REITs under its watch. They focus on leasing office space to specific types of clients, such as law firms, banks, government agencies, etc. Having said that they should continue to pay a good level of dividends! Long Term Investing & Shrugging Off Sharemarket Falls, Podcast: Property vs Shares A Closer Look at the Major Asset Classes, http://petewargent.blogspot.com/2019/11/when-to-hoist-sail.html, How to Become Rich AND Happy in One Blog Post, 10 Simple Lessons for Financial Independence. Currently, around 8% of the value of the ASX300 is made up of REITs. For retirees or those paying very little tax, thats pretty desirable. They monitor this by tracking whats known as the weighted average lease expiry, or WALE. Another one is those which own hotels or pubs and then rent those buildings back to the operators of those businesses. I doubt Thornhill would care to be honest. Both hold 30 REITs. As opposed to hoping it goes up in price, so to speak ???????? Login or sign-up for a free 25-day trial here. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. Good article, had some really clear points. Their properties offer self-storage to individuals and businesses, vehicle storage, as well as climate-controlled wine storage. Distribution yields may not fall as much as rents because values will likely also decline but they are still likely to fall further. Some REITs listed here didnt skup a beat and were absolutely fine, but others felt quite a pinch. No-one 'knows' the future demand profile for Australia's office market in a post-COVID world. Obviously, these will vary between different REITs, and a longer WALE is much desired. Updated: February 2022. By the way, theres absolutely no requirement to venture into the land of REITs. These properties used to be owned by Coles Group, who are now the major tenant in a joint-venture between Coles and another party. It benefits from a strong tenant profile, and 90% of its buildings are A-Grade assets. Right now VAS is 7.17% REITs. REITs typically pay a higher yield (often 5-7%) which appeals to some investors. Thats interesting. just checked share sight and the annual return is 22.5% per year which is pretty good. Centuria Office REIT (ASX: COF), has leased c.30,000sqm across its Australia-wide portfolio during HY23, which materially increased its occupancy to a healthy 96.4%. (full disclosure: I currently own this REIT). Learn the principles behind financial independence and start making progress right away. Always do your own research when making financial decisions and if you require personal advice, seek out a fee-for-service licensed advisor. Hi Dave, This article provides the list of the top stocks, ranked on the basis of the highest returns generated during the 2023 year-to-date (YTD). And that brings up another point, if you want to buy REITs but have no interest in choosing your own, you can always buy a REIT index fund. In the short term we would expect some decrease in floor space demand. Office landlords have been negotiating record high incentives to attract and retain tenants. e.setAttribute('type','text/javascript'); Each REIT will be different, but a few I follow are reporting slightly lower earnings due to rate rises. The seven office-focused Australian REITs (AREITs) we rate showed resilience to our stress tests on rental and asset-value declines.
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