The future of A-REITS

A comprehensive report provides plenty of food for thought for potential investors

- Pam Walkley

Investors who have put their faith in Australian real estate investment trusts (A-REITs) have done well over the past few years. Performance of the sector was up 24.86% in the year to November as measured by the S&P/ASX 300 A-REIT index. Longerterm returns are also sound, 13.58% a year over three years and 13.17% a year over five.

But behind the headline performance there are winners and losers among the funds. For example, based solely on price performance the Charter Hall Group (CHC) is up 47% for the year to date (December 16), whereas the Scentre Group (SCG) is down 5.3%.

For investors looking for A-REITs that will outperform in the future, a comprehensive Australian property sector report from investment bank Morgan Stanley raises some interesting themes that it says will dictate future performance in the sector.

“We prefer manufacturers over collectors, creators over owners, and we are selective with value,” says the Open for Inspection – Identifying the Best Investments report, by equity analysts Simon Chan and Lauren Berry.

Based on these themes, the report lists its top 14 A-REITs for the future including price targets. The top five are listed in the table.