In this article we discuss: - What an REIT is - The 3 property segments A-REITs operate in - Benefits of A-REIT investing - 10 top ASX A-REITs to watch in 2023
What is an REIT
A REIT or A-REIT (Australian Real Estate Investment Trust) as they are known in Australia – is a listed company which operates and invests in income-producing property.
Like shares, A-REIT investors can benefit from capital gains as well as income that is paid out in the form of dividend distributions.
While A-REITs shouldn’t be viewed as a substitute for owning physical property – investing in them allows investors to quickly and easily diversify their portfolio into property assets.
Different A-REIT property segments
A-REITs in Australia span many different property segments, but can primarily be broken down into three segments: commercial, industrial, and residential A-REITs.
Depending upon its business strategy, an A-REIT may own property across multiple segments or it may specialise in a specific area. For example, Scentre Group is focused exclusively on commercial properties, owning and operating 42 Westfield Living Centres.
Here’s a quick breakdown of the different segments and some of the most popular A-REITs in each:
1. Commercial property
Commercial real estate refers to properties primarily used for conducting business, and can include everything from office space, hotels, and shopping centres.
While both commercial and industrial real estate are focused on helping companies conduct business day-to-day, commercial real estate tends to be consumer facing.
Related A-REITs: Scentre, Vicinity Centres, Mirvac Group, Dexus, GPT Group, Charter Hall, Region Group, HomeCo Daily Needs, BWP Trust, Abacus Property Group.
2. Industrial property
From producing items to shipping them from A to B – in real estate the industrial property segment consists of the properties necessary for businesses to function.
These properties can include everything from warehouses, data centres, storage factories, and production facilities.
Related A-REITs: Goodman Group, Charter Hall, National Storage, Abacus Property Group, Growthpoint Properties Australia.
3. Residential property
Residential real estate is made up of properties used for private use, and primarily includes single-family units and apartments, as well as aged care homes / facilities.
Related A-REITs: Stockland, Mirvac Group.
Advantages and risks of investing in A-REITs
Below we look at some of the key advantages of investing in A-REITs.
Diversification
Though listed like a stock, as we mentioned at the start, A-REITs can help investors gain exposure to property as an asset class, without the need to physically own property – such as a residential home or commercial office building.
A-REITs also make it easy for investors to gain exposure to different, more exotic types of property assets – such as industrial and commercial properties – which in many cases are out of reach to individual investors.
Dividend Distributions
A-REITs have long been favoured by income-focused investors due to their high yields or high dividend payouts. These yields or distributions are derived from the property assets A-REITs own or invest in which generally generate predictable cash flows in the form of rental income.
At the time of writing, popular A-REITs were yielding well above the market average. Stockland had a dividend yield of 6.30%, Dexus was yielding 6.20%, and Vicinity Centres was paying out 5.00%. While those dividend distributions will likely fluctuate over time, they underscore why A-REITs are often attractive to income-focused investors.
Flexibility
Unlike owning physical real estate such as an apartment or piece of commercial real estate, A-REITs can be bought and sold like ordinary shares, giving investors significant flexibility to buy and sell the A-REITs of their choice at any time, based on changing personal circumstances or investment objectives.
A-REITs have many advantages, but as with all investments – from stocks, to bonds, to private art – they carry risk, including the risk of losing some or all of your invested capital. Real risk – as the legendary investor Howard Marks put it – is ‘the chance of permanent capital loss adjusted for inflation.’
Top 10 ASX REITs to watch in 2023
The table below highlights the top 10 ASX listed A-REITs currently listed on the ASX. This list is arranged from highest market capitalisation to lowest, and also provides information on share price and 5-year average dividend yields.
| Company | Ticker | Market Cap | Share price | 5-Year Dividend Average Yield |
| Goodman Group | GMG | A$36.8 billion | A$19.7 | 1.93% |
| Scentre Group Limited | SCG | A$15.67 billion | A$3.05 | 5.60% |
| Vicinity Centres | VCX | A$9.51 billion | A$2.09 | 6.27% |
| Stockland | SGP | A$9.05 billion | A$3.82 | 6.45% |
| Dexus | DXS | A$8.96 billion | A$8.35 | 5.05% |
| The GPT Group | GPT | A$8.93 billion | A$4.69 | 5.05% |
| Mirvac Group | MGR | A$8.8 billion | A$2.25 | 4.18% |
| Charter Hall Group | CHC | A$6.18 billion | A$13.09 | 3.26% |
| Charter Hall Long WALE REIT | CLW | A$3.27 billion | A$4.54 | 6.00% |
| National Storage REIT | NSR | A$3.01 billion | A$2.47 | 4.62% |
*Data from Morningstar correct as of 7 March, 2023.
This article/webinar is brought to you by Syfe Australia Pty Ltd, AFS representative number 001295306 representing Sanlam Private Wealth Pty Ltd (AFSL 337927). Any information contained here is factual and should not be construed by you as financial product advice. You should consider obtaining independent advice before making any financial decisions. Any reference to an investment’s past or potential performance is not an indication of any specific outcome or profit. We do not intend for any statement made here to relate to the acquisition or disposal of any shares in the companies or other financial products named here.
