Direct property markets again narrowly held on to positive performance, delivering a total return of 0.1% for the 12 months to 31 December 2020, according to data released by Zenith Investment Partners, MSCI, the Property Funds Association and the Property Council of Australia. While yield spreads remain attractive overall with income returns of 4.7% for the year, capital losses extended out to -4.4%, driven predominantly by the large exposure to retail and to a lesser extent, office sectors. While the deployment of COVID-19 vaccines has renewed optimism for the economic outlook, risks remain around the impact of tapering or removal of stimulus programs and its impact on real estate markets.
Total returns for the retail sector stayed negative as consumers remain cautious and retailer models evolve. Challenges in the office sector continue in the medium term as businesses innovate and space requirements remain uncertain, however, quality space is expected to retain the strongest demand. Industrial and logistics remain strong overall as the sector continues to benefit from elevated demand from online retail penetration during the pandemic, which has accelerated many of the longer-term secular trends in the sector.
While Australia has come through the pandemic in stronger shape than most countries outside the Asia Pacific region, uncertainty will remain a dominant theme in 2021. For more information, view the quarterly fact sheet.
The Property Investment Fact Sheet is an independent perspective of the risks and rewards of property compared to other asset classes such as equities. Zenith Investment Partners, MSCI, the Property Funds Association and the Property Council of Australia issue the Property Investment Fact Sheet each quarter. All data is sourced from MSCI, an independent global provider of research-driven insights and tools for institutional investors. Commentary is provided by Zenith Investment Partners.