SUMMARY
The A-REIT sector extended its strong run in July, advancing 3.38% and outperforming the broader equities market by 2.4%. This resilience came despite a modest 10-basis-point rise in 10-year bond yields to 4.26% and the RBA’s surprise decision to keep the cash rate steady at 3.85%.
The Fund returned 2.7% over the month. Over the 12 months to July 2025, the Fund delivered a strong return of 12.8%, outperforming the benchmark by 2.6%.
A-REITs typically benefit from falling interest rates, and the market was caught off guard when the RBA left rates on hold at its July meeting. The August board meeting delivered a 25bp rate cut.
COMMENTARY
As anticipated, the REIT reporting season is off to a solid start. Based on these early results, we expect to see the start and/or acceleration of NTA and earnings growth across most asset classes. The decline in BBSW is well recognised, and we anticipated that REITs would take advantage of lower swap rates to strengthen their hedging positions.
Transaction activity is also gathering pace, with increased asset recycling, heightened competition for AUM, and signs of improving demand for assets – even in more challenging segments such as office. The ability to now recycle assets at attractive spreads is particularly beneficial for smaller REITs with limited balance sheet capacity, and even more advantageous for REIT fund managers able to recycle capital into new opportunities.
The outlook for real estate is the strongest since COVID, supported by falling interest rates, stabilising asset values, robust rental growth, and constrained new supply due to rising replacement costs. As specialist active A-REIT managers, we are well placed to capture opportunities as market conditions improve.
The Fund sees compelling opportunities ahead, with residential and discretionary retail poised to benefit from persistent supply constraints. At the same time, powerful structural trends are creating momentum in alternative sectors – from data centres and land lease communities to self-storage and real estate private debt – offering multiple avenues for growth.