Australian property investors seek global exposure

There is huge disparity between property sectors as the world comes out of the pandemic and Australians property investors may be disadvantaged by the ASX’s weighting to retail.

Jonathan Shead, head of investments-Australia at State Street Global Advisors, said retail had been one of the sectors most dented by the pandemic.

“If you look back from pre-COVID to now, there is a huge disparity in where major sectors have ended up. Sectors like industrials or self storage are substantially ahead of where they were pre-COVID and industrials have powered ahead in Australia. But office and retail have not recovered the ground they lost at the beginning of COVID.

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“There’s a 50% gap between some of the good-performing sectors over the last couple of years and the poor performers. This makes it a very difficult market to select stocks in but also to time.”

He said this meant Australian investors were disadvantaged as ASX-listed property companies Scentre, Goodman Group and Vicinity were all focused on the retail space. Scentre and Goodman Group had both seen double-digits falls in their share price since the start of the year while Vicinity was up 4.9%.

“You only need to have three securities and that’s 50% of the market, which is just 24 names, and that concentration issue is why we may see Australian investors looking at global property.

“The range of sectors you can get exposure to globally is much wider and also the number of companies you get exposure to is much wider as well.”

This disparity in sector performance would continue over the next 12 months even as the world returned to normal, Shead said.

“Offices, we’re seeing rising vacancy rates and low utilisation and the recovery of the office sector is going to be very difficult. Retail has been highly challenged in the COVID environment but that’s exacerbating a trend that was already there. It was already struggling to compete before COVID and has long-standing challenges whereas offices are facing a new challenge.

“But other areas like industrials will continue to do well and self-storage has already had huge growth.”

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