G-REITs fundamentals still in good shape

Oksana Patron

26 September 2022

The fundamentals of global real estate investment trusts (G-REITs) remain strong despite the challenges facing property sub-sectors, such as office and retail, as global REITs offer liquidity and good quality, according to Resolution Capital.

Andrew Parsons, the firm’s chief investment officer, said that global real estate was ‘a great surrogate for direct real estate’.

“We’ve found over a long period of time is that G-REITs produce competitive returns, a very competitive income yield, they can serve as an inflation hedge and importantly G-REITs are liquid property investments,” he said.

“Some of the world’s best real estate is in the listed market – G-REITs platforms have the best quality real estate in the world in some of the most outstanding real estate markets in the world.”

Parson also reminded that the challenges that the sector was facing were very different compared to the Global Financial Crisis (GFC).

“The GFC was about overbuilding of residential property. Huge amounts of construction activity that wasn’t needed that led to the subprime crisis, overbuilding and the property crash. But what we can see today is that construction activity is actually quite modest,” he said

“So, we’ve got high occupancy and modest supply, which means that the real estate market is actually in very good shape to go into these more challenging conditions.”

According to Resolution Capital, income from G-RIETs was also a more significant component of the total return – consistently better than fixed interest and equities, while the earnings were far more stable than equities which gave investors a lot more confidence about the reliability of the income streams.