A-REITs in Australia had a stellar 2014 and look set to continue to outperform in 2015 due to:
- This low interest rate environment has historically benefitted A-REITs which have been inversely correlated with the Australian 10 year Bond Yields.
Source: Bloomberg, Market Vectors, 31 December 2009 to 4 February 2015A-REITs yields remain well above the 10 year bond yield. Currently the spread differential is ~120bps above the long term average.
- Corporate activity in the sector continues as evidenced by the recent merger announcement of Novion Property Group (NVN) and Federation Centres (FDX).
- With positive cash flows and normalised gearing levels A-REITs will continue to pay income. This is primarily due to fixed rental increases and the long term nature of leases.
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