Ongoing demand and limited supply will keep office, retail and industrial property values strong and offer good returns for investors using Australian real estate investment trusts (AREIT), according to an SG Hiscock portfolio manager.
Grant Berry, who oversees the SGH Property Income Fund, said the dual factors of population growth and ongoing supply constraints are key drivers in shaping AREIT returns.
“Australia is forecast to grow from 27.6 million people today to 32 million within a decade. That’s an extra 4.5 million people who need housing, logistics infrastructure, retail space and essential services,” Berry said.
“At the same time, new supply remains constrained across property subsectors. This imbalance continues to support long-term demand and asset values.”
He said future office supply will continue to be limited off the back of slow growth, with Sydney recording an average stock addition of 0.7 per cent annually over the past 20 years, while Brisbane and Perth have delivered 1.6 per cent, and Melbourne has added 2.2 per cent on average.
Retail supply growth has also been slow at around 1.7 per cent a year over the past decade as planning barriers, land availability and construction costs have risen, while industrial property has been more responsive, although rising construction costs are expected to dampen future supply.
“Supply in Australia across property sectors remains tight. Population growth doesn’t just shift the numbers, it reshapes the physical landscape,” Berry added.
He pointed out investors using AREITs could access a diverse, income-generating property portfolio, but warned against relying on broad market indices to invest.
“Take Goodman Group as an example. At the end of October, they represented more than one-third of the S&P/ASX 300 AREIT Index. Combined with other fund manager-style AREITs, these entities now make up 43 per cent of the index – up from 17 per cent just five years ago,” he said.
“Some of these businesses are primarily fee-generating fund managers rather than pure property owners. For investors seeking real income and tangible asset exposure, it’s important to understand that distinction.
“For those seeking real assets, real income and genuine long-term value, AREITs remain a powerful tool. The key is active management, concentrating on true property ownership, sensible sector diversification and avoiding overexposure to fund manager-style AREITs.
“In a market driven by real demand, the strongest opportunities come from what’s real.”