Property funds’ AUM rise 6pc in 2014

Property funds are seeing growth in their assets under management (AUM) for the first time since the global financial crisis (GFC), an industry survey reveals.

Property Investment Research's (PIR) 13th Australian Property Funds Industry Survey, which profiled 74 managers with assets of $264 billion, showed a six per cent rise in total property fund assets in 2014 compared with 2013.

The research found that unlisted wholesale vehicles accounted for the majority of the growth in AUM, with "the long-suffering" Australian Real Estate Investment Trust (A-REIT) sector also showed signs of growth for the first time since the GFC.

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"Our findings are consistent with the observation that Australian institutions have become net buyers of commercial property, buoyed by a low cost of debt, stronger equity markets (in the case of A-REITs) and greater management confidence," PRI said.

"Despite the cheap money on offer, however, leverage remains manageable at 27 per cent — well below the levels that prevailed before the GFC."

PRI said the findings also showed that the "fundamental metrics of Australian property also look manageable", and had not changed significantly in the previous 12 months.

Going forward, PIR said prime sectors including industrial and CBD office were set to become "a seller's market", which may make A-REIT buying more selective, or make it the domain of "smaller, nimbler managers".

"On the other hand, PIR expects the unlisted wholesale sector (and A-REITs with funds management businesses) to benefit from pension and sovereign wealth funds' interest in alternative assets such as infrastructure, private equity, and relevantly, property," the report said.

"Over the longer term, new opportunities and threats are bound to arise from broader structural, social, or economic developments (for instance, technological change may spur demand for certain asset classes while creating new challenges for others), and we look forward to chronicling these trends."


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