Welcome to this week’s Property News.
This week is another reminder that those AREITs with exposure to the key wholesale and logistics markets have been best positioned to grow earnings during the COVID restricted season. Goodman and Charter Hall have both upgraded earnings off the back of improved tenant demand, higher valuations and higher fees.
Opportunistic buyers are however looking back to the heavily impact Retail and Tourist markets in search of value. We have recently reported on the surge in sales in the retail sector, however the acquisition of the Sydney Sofitel last week for $315m suggests buyers are expecting a quick return to pre-covid conditions.
Other non-core sectors including childcare, healthcare, self storage and residential land communities are also benefiting from the weight of capital seeking passive income through real estate. Blackstone’s acquisition of the Fort Knox portfolio of self storage assets for $400m is a classic example of investment capital looking for higher returns, particularly from assets which have an ability to maintain rental growth in with inflation.
I expect we will continue to see further flows of capital into well diversified portfolios of real estate assets. Further consolidation / privatisation of AREITs are likely and several REITs which were takeover targets prior to COVID are likely to be re-examined over next 6 -12 months.
Whilst I expect the retail sector to enjoy healthy sales through the Christmas / New Year period, a lack of staff and a lack of stock is likely to hinder a return to normal.
Our CBDs will continue to face challenging conditions through to February as Office workers will continue to work from home until the new year. The impacts of this are significant for our CBD retail tenants and owners and to a less extent on Office landlords.
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Until next week