Aussie wholesale property funds return 0% in Q1 2023

Oksana Patron

21 April 2023

The difficult market conditions, with rising inflation and interest rates, have seen Australian Core Wholesale Property Funds return zero percent in the first quarter of 2023, according to the analysis from MSCI Real Assets.

Overall total return for the MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index was marginally under 0% as commercial real estate market enters correction for first time since 2009.

However, despite the recent slowdown, overall annual performance remained in positive territory. On a rolling 12-month basis, the Index recorded a total return of 4.2% in Q1 2023, compared to the 6.4% recorded in Q4 2022, but well below the 12.5% recorded 12 months ago.

What is more interesting, the industrial sector recorded negative capital growth on a quarterly basis at -0.4% for the first time since March, 2016, while office funds remained the main antagonists as they recorded a -1.2% capital growth, but this was still a slight improvement from the -1.5% recorded in Q4’22.

Retail funds, meanwhile, recorded capital growth of – 0.8% for the quarter, according to the analysis.

Benjamin Martin-Henry, head of Pacific Real Assets Research at MSCI, said that the market entered a period of correction as for the first time since 2009 and all sectors recorded declining capital growth for the quarter.

“Each sector has their own nuances that they are grappling with, but the overarching economic issues – namely cost of debt and inflation – are impacting everyone,” he added.