Social distancing hits AREIT returns

A-REITs/property/Zenith-Investment-partners/

3 July 2020
| By Laura Dew |
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The average Australian real estate investment trust (AREIT) index lost 16.4% in the 12 months to 31 May, 2020, as a result of the ‘profound impact’ caused by the COVID-19 pandemic, according to Zenith.

However, it fared better than its global counterpart index which lost 18.6%.

On a fund-specific basis, the median AREIT manager lost 14.3%, a slight improvement on the index.

Senior investment analyst at Zenith, Dan Cave, said the social distancing policies which saw people working from home had a profound impact on property returns.

However, he felt property still had a role to play in portfolios for its diversification benefits and yield advantages. Cave highlighted alternative assets that were away from offices or industrials such as self-storage and data centres which offered lower cyclicality and reduced portfolio volatility.

“REITS offer diversification benefits for multi-asset portfolios due to the asset classes’ underlying characteristics. There are also yield advantages owing to the rental income focus, and the opportunity for further sub-sector diversification across the emerging alternative sectors which provides lower levels of cyclicality compared to traditional property types,” he said.

"The outbreak of COVID-19 has quickly translated into a severe shock for the global economy and real estate markets, and the situation continues to be fast-moving. Zenith will continue to observe the sector closely, with a focus on how fund managers, landlords and tenants respond to current challenges and how this likely impacts or rewards investors."

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