By guest contributor Ebony Chapman, Atchison Consultants
Australian real estate investment trusts (AREITs), as represented by the S&P/ASX 200 REITs Index, returned 6.4%, outperforming the S&P/ASX 200 return of 5.0% over the month.
Over the 12 months to January 2020, AREITs posted a total return of 19.6% (5.1% lower than the S&P/ASX 200 return of 24.7%).
Sector Performance
Table 1 below shows the performance of AREITs for various periods ending 31 January 2020.
The medium-to-long term performance of AREITs has been relatively strong. Over the 3 years and 5 years to the end of January, the sector produced total returns of 13.2% and 10.7% per annum respectively.
Sector returns in January were led by Industrial AREITs with 11.2%, fuelled by Goodman Group (GMG) returning 11.37% over the month. Office AREITs followed with 7.6%, Diversified AREITs with 7.7% and Retail AREITs with 1.5%. The three worst performers of the month were Unibail-Rodamco-Westfield (Retail, -8.40%), Ingenia Communities Group (Residential, -3.6%) and Rural Funds Group (Specialised, -3.4%).
Table 2 below shows the income performance of AREITs for various periods ending 31 January 2020.
The income component of the total return was 4.6% for the 12-month period to January 2020. The annual volatility of income returns was 2.1%.
The AREIT sector was trading at an earnings yield of approximately 5.7%, which was higher than yields of both cash and Commonwealth Government bonds. The premium to Australian 10-year government bonds was 4.5%.