A key architect of the compulsory retirement savings system lauds its many achievements, stretching from the national economy to the individual. Where it’s double faulting is in serving members – and it needs to be addressed promptly.
With performance and diversification driving demand, these funds are expected to experience four-fold global growth over the next decade to nearly $AU65 trillion.
Turbulent markets will suit commercial real estate: Analysts
Listed Australian commercial property funds, which outperformed the S&P/ASX 200 index in 2024, are better positioned to weather market volatility with institutions putting improving valuations and development opportunities under the investment microscope, according to fund managers and analysts.
For overseas players, a weaker Australian dollar is a bonus, they add.
The long-term outlook is strengthening as valuations improve, development opportunities grow and investors look for a conservative buffer against global market turbulence, they claim.
Commercial real estate, as measured by the Australian-Real Estate Investment Trust (A-REIT) 200 Index, returned about 20 per cent in 2024, compared with about a 12 per cent return for the S&P/ASX 200, according to analysis by the consultancy firm BDO.
But there is a growing sentiment that this out-performance has further to run with the investment bank Morgan Stanley “confident” that up to 24 months of asset devaluations across listed A-REITS “are behind us”, except for the office sector – and even there the negative momentum is easing.
Janus Henderson Investors, an adviser to institutional and high-net-worth investors, believes “steady and boring” property returns are becoming more attractive as political rhetoric about tariffs increases volatility.
“While it’s tempting to get caught up in the daily excitement of the news cycle and accompanying market turbulence, we would advise not turning the plane around, but instead focus on the destination and look for a less bumpy route to get there,” says Guy Barnard, Janus Henderson’s co-head of global property equities and portfolio manager.
There will be hiccups along the way. A-REITs were down more than four per cent in February 2025, although excluding the Goodman Group (ASX:GMG), a global industrial property and digital infrastructure specialist group, the sector was up by about 0.6 per cent. Strongest growth was in storage, social infrastructure and logistics.
Goodman, a sector giant, was hit by the potential impact of artificial intelligence on its multi-billion-dollar exposure to data centres, and its price has fallen about 20 per cent from its $38.63 peak on January 22, 2025. And office concentrated stocks, such as Mirvac, Dexus and GPT, continue to be affected by high interest rates and market volatility.
While volatility is unnerving markets, many analysts say commercial property is better positioned to weather such a market environment.
Barnard, who argues the source of much recent volatility has been the commentary around tariffs and the potential impact of workforce reductions in the US federal government, asks: “What does this have to do with commercial property fundamentals? The answer, we believe, is likely very little.
“Investors seemingly haven’t had much interest in ‘defensive growth’ for several years, but perhaps this will now begin to change. Maybe their defensive characteristics make them even more attractive at an uncertain time.”
AMP chief economist Shane Oliver adds that President Donald Trump was elected on a mandate to get the cost of living down for Americans, “not push it up”.
“This could ultimately mean more of a focus on tax and efficiency policies, which would be positive for shares as opposed to tariffs.”
Growing optimism for the commercial sector is based on leading A-REITs increasingly taking control of their growth strategies, improved debt capacity, ability to raise capital, development opportunities and stronger acquisition outlook, according to Jarden Australia, an investment and advisory group.
Jarden analyst Lou Pirenc says the Reserve Bank’s 25 basis points interest rate cut in February flagged a more “constructive outlook” for earnings and asset value for the listed property sector but adds the “recovery will take some time”.
Damian Diamantopoulos, property income fund manager for Australian Unity, which has more than $10 billion in health care and social infrastructure property, ranging from student accommodation to specialist disability, adds growing optimism that improved economic and population growth could support commercial property.
“The recent decline in the strength of the Australian dollar will continue to make high-quality real estate assets attractive to overseas based investors.”
Morgan Stanley says industrial fund rates of return have increased by 140 basis points since last June and there has been a positive turnaround in the value of retail portfolios. Office valuations have fallen by more than 26 per cent over the same period.
It claims Charter Hall (ASX: CHC) and Centuria Capital Group (ASX:CNI) provide investors with the best exposure to bottoming valuations, rising fees and higher assets under management as transactions grow.
Morgan Stanley analyst Simon Chan says Charter Hall, which has about $83 billion under management, is well placed to capture increased assets under management from a diverse range of retail and wholesale sources, rising transaction volumes and products, such as a convenience retail fund.
“It continues to find new ways of matching capital with property that will accelerate assets under management,” Chan says.
Pirenc says Jarden is overweight in Charter Hall because of its strong transaction activity, fund raising and maximising growth from a growing portfolio.
Alternatively, Centuria, with assets totalling around $21 billion, will benefit from its diverse asset and retail investor base as valuations bottom, according to Morgan Stanley’s Chan. “If the Reserve Bank implements further rate cuts , there should be a natural tailwind on inflows.”
