By Chris Owens, Analyst, Atchison Consultants
Australian real estate investment trusts (AREITs), as represented by the S&P/ASX 200 AREIT Index, returned +6.6% in the month ending 31 March 2021. The AREIT index outperformed the S&P/ASX 200 return of +2.4% over the month.
Over the 12 months to March 2021, AREITs posted a total return of +44.7%. This is 7.2% higher than the S&P/ASX 200 return of +37.5%.
Sector Performance
Table 1 below shows the performance of AREITs for various periods ending 31 March 2021.
Over the 3 years and 5 years to the end of March, the sector produced total returns of 7.6% and 5.6% per annum respectively.
Sector returns in March were led by Industrial AREITs with +9.5%, followed by Office AREITs with +8.4%, Diversified AREITs with +7.8% and Retail AREITs with +1.0%. Returns were strong across all sectors on the back of easing covid restrictions. The positive performance of AREITs for March can be partially attributed to recent comments by the RBA detailing how interest rates are unlikely to increase until 2024.
Table 2 below shows the income performance of AREITs for various periods ending 31 March 2021.
The income component of the total return was 3.6% for the 12-month period to March 2021. Annual volatility of income returns was 2.0%, which is low when compared with other asset classes.
AREITs were trading at an earnings yield of approximately 6.1%, significantly higher than yields of both cash and Commonwealth Government bonds. The spread of the earnings yield over the 10-year government bond yield remained at 4.4%.