The ASX 200 AREIT Accumulation index rose by 3.15% over the
quarter ending 31 March 2014.
S&P ASX 200 AREIT Accumulation
The February reporting season contained few surprises with
AREIT's generally reporting in-line with market expectations.
Earnings per share (EPS) for the 6 months ending 31 December grew
by 3.3% and Net Operating Income was up 2.3%. A modest increase in
asset values in the sector led to a 2.5% increase in Net Tangible
The outlook for key sectors is as follows:
The improvement in global and local economic conditions would
ordinarily flow through to increased office demand but CBD office
vacancies have increased over the year (Sydney CBD 10%, Melbourne
11%, Brisbane 16% and Perth 11%). Brisbane has been impacted by the
contraction in the government sector while the downturn in mining
services has affected Perth. As a result, generous lease incentives
have masked a fall in effective rents (by around 3% in Sydney and
as much as 10% in Brisbane and Perth). Nevertheless, investor
demand has actually driven an increase in prices for office
properties, largely driven by the low interest rate environment. In
conclusion, we expect economic conditions to improve office demand
somewhat but large vacancy rates will continue to suppress rental
growth and capital appreciation.
Vacancy rates have increased slightly but remain very low.
Recent strength in retail sales is a positive development as has
been the fall in the AUD, which reduces demand for online and
imported goods. Overall, the 12 month outlook for the sector
remains relatively positive.
Primary demand for industrial property is driven by a need for
warehouse facilities for the retail and logistics sector, as well
as the manufacturing sector (heavy and light industrial usage). The
improved domestic outlook should increase demand by retail and
logistics, which should largely offset the ongoing decline in the
manufacturing sector. We would expect rents to remain broadly flat
until new supply becomes available.
AREITs exposed to residential property and construction should
fare well over the next 18 months as low interest rates continue to
fuel a housing recovery. With interest rates at record lows and
household debt near record highs, we believe this recovery is
unsustainable over the medium term.
In conclusion, the outlook for Australian equities remains more
favourable than AREITs at this juncture. Nevertheless, the sector
is reasonably valued and should remain supported in this low
interest rate environment. We recommend investors retain a modest
An actuarial review of the Invensys Australia Superannuation Fund showed it to be in surplus to the tune of $189.2 million. In mid 2003, the Invensys Group proposed to the trustee that the surplus be repatriated to the principal employer in the group.
Lenders in New South Wales breathed a sigh of relief earlier this month when the Supreme Court ruled in Bank of Western Australia Ltd v. Primanzon  NSWSC 862 that two part-time commercial property investors could not claim relief under the Contracts Review Act 1980 (NSW) because the loans advanced to them were entered into in the course of a trade, business or profession carried on by them.
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