With inflation cooling and interest rates peaking in the United States, global asset managers are generally optimistic about the prospects of the real estate investment trust (REIT) market through 2025. American Century Investments, a US asset management giant, predicts that global REITs will achieve earnings growth of 4 to 51% this year, and 6 to 71% in 2026, driven by rising rents and a shortage of supply.
Steven Rodriguez, Vice President and Investment Manager at American Century, noted that combined with dividend returns of approximately 3%, REIT investors could potentially achieve a total return of approximately 10%. He described the market outlook as "solid," noting that "the end of the rising interest rate cycle, coupled with the reduced risk of rekindled inflation, further boosts investor confidence."
Australian REITs outperformed globally, with Goodman leading the way
The Australian REIT market achieved a total return of 18.51 TWD in 2024, significantly exceeding the ASX 200's overall gain of 11.21 TWD and outperforming most global REIT indices. Goodman Group, a logistics giant with a market capitalization of A$70 billion, saw its share price surge by 421 TWD throughout the year, becoming a market focal point.
Goodman has been actively transforming its business in recent years, shifting its focus from traditional warehouse facilities to hyperscale data center projects, attracting a surge of institutional investment. American Century also holds shares in the company and has "high confidence" in its future performance.
Scentre rides retail recovery as supply shortage pushes up rents
Rodriguez noted that construction activity has slowed significantly since the pandemic, with new supply far below historical levels, giving most landlords a bargaining advantage. This supply-demand imbalance is expected to persist for several years, benefiting REITs in increasing rental income and driving earnings growth.
In addition to industrial real estate, American Century is also bullish on Westfield shopping mall owner Scentre Group. With retail sales rebounding globally and the global scarcity of new shopping mall supply over the past decade, existing landlords like Scentre are poised to benefit from increased demand for physical stores from retail tenants.
Experts are optimistic that the annual return can reach 8 to 9% in the next three years
Matthew Sgrizzi, a portfolio manager at LaSalle Investment Management, another global asset management firm, predicts that REITs may be entering a new "golden age." He predicts that with continued easing of financial conditions, REITs will achieve an average annual total return of 8 to 91 TPV over the next three years. If market conditions improve further, returns could even reach double digits.
The office market is recovering moderately, but investors need to choose their assets carefully.
Although the office market is still affected by the work-from-home trend and some parts of the world, such as the United States, are still in a "rampant" state, major fund companies including Janus Henderson have also pointed out that office occupancy rates have shown signs of stabilization. As transaction volumes pick up in the future, asset valuations are expected to rebound.
Guy Barnard, co-head of Janus Henderson, added that the REIT's overall operating performance remains resilient, with high occupancy rates and continued rent increases, which will be conducive to further growth in cash flow and dividends.
If you are interested in learning more about a specific REIT fund or would like to understand its tax and legal structure, please contact us for further analysis.
Chinese