By Chris Owens, analyst, Atchison Consultants
Australian real estate investment trusts (AREITs), as represented by the S&P/ASX 200 REITs Index, returned 13.2% in the month ending 30 November 2020. The AREIT index has outperformed the S&P/ASX 200 return of 10.2% over the month.
Over the 12 months to November 2020, AREITs posted a total return of -9.2%, which is 6.8% lower than the S&P/ASX 200 return of -2.0%. AREITs have not yet fully recovered from the 35.5% fall in March.
Sector Performance
Table 1 below shows the performance of AREITs for various periods ending 30 November 2020.
The easing of COVID-19 restrictions has had a positive impact on the performance of AREITs for month of November. Over the 3 years and 5 years to the end of November, the sector produced total returns of 5.4% and 7.7% per annum respectively.
Sector returns in November were led by Retail AREITs with 25.5%, followed by Diversified AREITs with 16.1%, Office AREITs with 10.8% and Industrial AREITs with 1.6%. High returns from Retail AREITs reflected the easing of COVID-19 restrictions in Victoria. While Office AREITs saw a significant rise on the back of workers returning to the office.
Table 2 below shows the income performance of AREITs for various periods ending 30 November 2020.
The income component of the total return was 3.8% for the 12-month period to November 2020. Annual volatility of income returns was 1.9%, which is low when compared with other asset classes.
AREITs were trading at an earnings yield of approximately 6.0% which was significantly higher than yields of both cash and Commonwealth Government bonds. Australian 10-year government bond yields finished November at 0.90%. The spread of the earnings yield over the Government bond yield remained steady at 5.1%.