Multiple tailwinds for global REITs

Australians have a "well-documented love affair" with local residential property, but global real estate tends to be missing from investors' portfolios, says Quay Global Investors.

Strong macro-economic themes such as the ageing population, the growth of the knowledge-based economy and technological advancements are underpinning the returns of listed global real estate, says Quay Global Investors’ principal Chris Bedingfield.

Mr Bedingfield said Australian investors looking to diversify their portfolios should consider global REITs, which are closely correlated with global equities.

“Unhedged global real estate has been one of the best performing asset [classes] since the turn of the century, delivering around 8 per cent compound total returns,” Mr Bedingfield said.

In addition, global property is not as sensitive to rising interest rates as investors tend to believe, he said.

“While interest rates do affect the performance of global REITS over the short-term, over the longer term the impact is negligible,” Mr Bedingfield said.

“During the last interest rate tightening cycles in the US and in Australia, global real estate did not underperform; in fact during this period global REITs were a particularly strong performer, in part thanks to a strong performance from the US.”

Mr Bedingfield also pointed to macroeconomic trends that benefit global REITs, including “the aging population, housing undersupply, knowledge-based trends and the growth in e-commerce and technology”.

“For instance, approximately 10,000 Americans turn 65 every day, and will do so until 2030; yet the construction industry serving this market displays all the traits of under-investment,” Mr Bedingfield said.

“Property opportunities which are underdeveloped and overlooked include hospitals, medical offices, life science and nursing homes.

“Likewise, with rising housing unaffordability seemingly a global phenomenon, there is opportunity in global rental apartments and manufactured housing.”