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Home December 2025 quarter ASX A-REIT market update
January 22, 2026

December 2025 quarter ASX A-REIT market update

Stuart Cartledge, Managing Director, Phoenix Portfolios

 

Market Commentary

The S&P/ASX 300 A-REIT Accumulation Index lost 1.2% over the December quarter, marginally underperforming the broader equity market, with the S&P ASX 300 Index off 0.9%.

With property transaction markets open once more, property fund managers were strong performers in the period. Centuria Capital Group (CNI) was busy expanding its agricultural real estate business. Firstly, its unlisted Centuria Agricultural Fund (CAF) secured the purchase of Australia’s largest hydroponic greenhouse for $168 million. It then acquired agricultural property business Arrow Funds Management adding a further $444 million of agricultural funds to its platform. It finished the quarter up 31.2%. HMC Capital Limited (HMC) showed some signs of stabilisation amongst what has been a challenging year, gaining 24.5% over the quarter, but remaining down 58.6% for the full year. Charter Hall Group (CHC) also showed good momentum, upgrading operating earnings per security (OEPS) guidance by 5.5%, supported by heightened investment activity within its property investment and funds management platform. CHC finished the period 8.6% higher. Somewhat bucking the trend was Goodman Group (GMG) which disappointed some market participants by not upgrading its own earnings guidance and providing no details on new funds management products at its quarterly update. This was somewhat rectified in December, with the announcement of a $14 billion data centre partnership with CPP Investments. GMG closed the quarter down 5.0%.

Retail property owners performed well in the period. Ongoing solid rent growth, supporting by an increasing population and limited new supply is restoring the negotiating power of shopping centre owners. Regional mall owner Scentre Group (SCG) gained ground, adding 2.9%, whilst competitor Vicinity Centres (VCX) rose 1.6%. SCG-managed Carindale Property Trust (CDP) gained 5.6%, as the Lendlease Group (LLC) fund that owns a stake in the Westfield Carindale Shopping Centre appears to be on a trajectory to wind up. Owners of smaller neighbourhood shopping centres also outperformed, with Region Group (RGN) up 1.2% and Charter Hall Retail REIT (CQR) eking out a 0.1% gain.

Office property owners displayed some weakness in the quarter as bifurcation in the rent growth and values of office properties across jurisdictions and class appears to be widening. The cores of the Sydney and Brisbane CBDs appear to be recovering, with investor interest in those areas reemerging. Suburban and secondary locations are finding it more difficult to attract robust bidding and are seeing persistent elevated incentives. Smaller office property owners Centuria Office REIT (COF) and GDI Property Group (GDI) underperformed the market, losing 2.1% and 2.9% respectively. Mirvac Group (MGR) was a laggard, dropping 7.6%, while large cap competitor, Dexus (DXS) only gave up 0.8%.

Long weighted average lease expiry (WALE) property owners were amongst the weakest in the period. This property is particularly sensitive to longer term interest rates. With the Australian 10 Year Government Bond yield increasing from approximately 4.3% to 4.8% over the quarter, it is unsurprising that this property underperformed. Childcare property owners were weakest, facing higher interest rates and negative sentiment towards the sector. Charter Hall Social Infrastructure REIT (CQE) gave up 7.9%, while Arena REIT (ARF) lost 7.0%. It is worth noting that direct market transactions for this type of property appear to remain robust. Owners of petrol station properties fared somewhat better, but still underperformed, with Waypoint REIT (WPR) and Dexus Convenience Retail REIT (DXC) off 4.0% and 4.3% respectively.

Australia’s residential housing market is at an interesting juncture, with chronic undersupply running into ever increasing affordability concerns. Across the period, it appears as if house price momentum has stalled in Sydney and Melbourne, however, continues to march on in Brisbane, Perth and Adelaide. After producing solid returns earlier in the year, residential property developers lost some ground in the period. Peet Limited (PPC) announced the conclusion of its strategic review, with more of an “evolution” than a “revolution” in strategy. It was down 1.0% over the period. Perth-focused Finbar Group Limited (FRI) gave up 4.0%, however has restocked its project pipeline for the coming years. Large cap developer, Stockland (SGP) dropped 4.9%, easing after strong performance earlier in the year.

Market outlook

The listed property provides investors with the opportunity to gain exposure to high quality, institutionally managed, commercial real estate, with projections of solid prospective growth. While share market volatility may be uncomfortable at times, the offset is liquidity, enabling investors to rebalance portfolios without the risk of being trapped in illiquid vehicles.

Property, both listed and unlisted, is a particularly interest rate sensitive sector. In recent years interest rates rose off generational lows, providing a headwind for real estate returns and valuations. The Reserve Bank of Australia has now reduced its Cash Rate Target three times since February 2025, providing a more supportive environment for real estate securities. The August reporting season reflected this, with companies under coverage providing solid updates, valuation growth and an expectation of liquidity returning to the property transaction market. Long term valuations are driven by “normalised” interest costs, meaning the impact of short term hedges maturing is mostly immaterial.

The industrial sub-sector continues to show strong absorption of relatively high levels of supply, aided by the tailwinds of e-commerce growth, the potential onshoring of key manufacturing categories and the decision by many corporates to build some redundancy into supply chains to cope with current disruptions. All of these factors are contributing to ongoing demand for industrial space, albeit the previous period of market rents expanding rapidly appears to have dissipated. Vacancy rates remain near historic lows of around 3% in many markets. While rental growth has recently cooled, construction costs remain elevated, making additions to supply difficult and thereby prolonging conditions.

We remain cognisant of the structural changes occurring in the retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent performance of shopping centre owners has however been strong, with consumers showing resilience and share prices moving higher, with some trading at meaningful premiums to net tangible asset backing. Importantly, we are also now seeing positive re-leasing spreads in shopping centres, indicating strengthening demand from retail tenants. These outcomes are no doubt aided by minimal vacancy across retail portfolios.

The jury is still out on exactly how tenants will use office space moving forward, but demand for good quality, well located space remains solid and there is growing momentum from companies to get staff back into the office. Leasing activity is beginning to pick up, and transactional activity is also returning, with discounts to book values materially reduced. Incentives on new leases remain elevated. At this stage demand for office space appears to be highly variable depending on location, even within submarkets.

We expect to see limited further downside to asset values in office markets but elsewhere expect market rent growth to drive valuations higher as capitalisation rates appear to have stabilised. Listed securities provides exposure to such growth.

The content above is taken from the Cromwell Phoenix Property Securities Fund quarterly report. Sign up here to be the first to access the latest report and to gain a deeper insight into the Fund’s performance.

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