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Home June 2026 quarter ASX A-REIT market update
July 21, 2026

June 2026 quarter ASX A-REIT market update

Stuart Cartledge, Managing Director, Phoenix Portfolios

Market Commentary

The S&P/ASX 300 A-REIT Accumulation Index gained 13.5% over the June quarter, meaningfully outperforming the broader equity market, with the S&P ASX 300 Index up 4.1%. This quarter marks a reversal of the weakness seen in the property sector in the previous quarter. Performance was also supported by the 10 Year Australian Government bond yield moving from 5.0% at the start of the period to 4.75% at its conclusion.

In a recovering property market, property fund managers were the major outperformers. Lower interest rates and a more stable world should support property transaction activity. The market brushed off concerns that changes to Australia’s taxation regime would hurt fund managers, with some making the argument that income strategies would become relatively more favourable under the proposed changes. Qualitas Limited (QAL,) a property debt fund manager, may be a beneficiary, and was rewarded, finishing the quarter 28.6% higher. HMC Capital Limited (HMC) gained 26.9% bouncing off its lows. Centuria Capital Group (CNI) and Goodman Group (GMG) were supported by renewed enthusiasm for data centre investments. CNI added 25.5% despite raising equity in the quarter, while GMG lifted 22.5%. Charter Hall Group (CHC) also performed strongly after further upgrading full year earnings guidance in the period. It jumped 24.1%.

At the other end of the spectrum, residential property developers were underperformers over the period, likely impacted by proposed budget changes, such as the removal of negative gearing and changes to the discounting of long term capital gains. Things may not be all doom and gloom for developers, with newly built property carved out of these changes. Despite this, negative sentiment and decreasing house prices across most of the country is still likely to weigh on new sales for developers in the short term. Perth apartment developer Finbar Group Limited (FRI) was weakest, losing 9.7%. Peet Limited (PPC) also lost ground, giving up 4.6% despite upgrading FY26 earnings guidance in the quarter. Large capitalisation peer Stockland (SGP) also faced pressure despite achieving positive outcomes in its non-residential portfolio. It dropped 1.6%.

Office property owners were also underperformers over the June 26 quarter. While there have been some pockets of solid rental growth in office markets, incentives remain stubbornly high and the recovery is not broad based. Limited new office supply in the short to medium term should support effective rent growth, however markets are starting from an elevated level of vacancy. In this environment, Dexus (DXS) was weak, losing 5.8%, hurt by ongoing challenges in its funds management business. Centuria Office REIT (COF) also finished the period lower, giving up 1.6% amid ongoing weakness in suburban office markets. Mirvac Group (MGR) finished the quarter marginally down, off 0.1% as it faces challenges fully leasing its nearly completed office developments. Perth-exposed GDI Property Group (GDI) fared better, adding 5.0%, still meaningfully underperforming the index.

Retail landlords added value from an absolute perspective in the period, however faced mixed performance relative to the very strong broader property index. The lone outperformer was Scentre Group (SCG), owner of Westfield-branded shopping centres, which gained 16.3%, recovering from a weak first quarter in 2026. Competitor Vicinity Centres (VCX) also performed well, up 10.3%, however this was not enough to keep up with the index. Neighbourhood shopping centre owners also underperformed, with Region Group (RGN) adding 5.8% and Charter Hall Retail REIT (CQR) lifting 4.6%. Interestingly, there was a large amount of regional shopping centres transaction in the period, led by Westfield Marion in Adelaide. The average cap rate amongst the largest deals was 5.8%, which represented a 1.4% premium to prior independent valuations.

Market outlook

The listed property sector 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, represents a particularly interest rate sensitive sector. In recent years interest rates rose off generational lows, providing a headwind for real estate returns and valuations. Despite three cuts in the Reserve Bank of Australia’s target cash rate since February 2025, renewed inflationary concerns have forced the RBA to hike rates three times beginning in February 2026 and potentially more to come. Offsetting this, the February reporting season showed property capitalisation rates have stabilised and valuations have risen, along with positive rental growth. The tussle between bond rates and capitalisation rates is ever present, but the recent sell-off in listed property stocks provides a meaningful buffer to investors in listed securities.

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 has 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 buoyant 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. 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 some office markets but elsewhere expect market rent growth to drive valuations higher as capitalisation rates appear to have stabilised. Listed securities provide exposure to such growth, commonly with a buffer to underlying net asset values.

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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