ASX real estate investment trusts (REITs) have faced a challenging few years, grappling with rising interest rates and headwinds in the broader property market.
It has been a mixed bag for real estate stocks in 2024, with some clear winners and losers.
But with stabilising property values and the potential for interest rate cuts on the horizon, could ASX REITs make a rebound? Or will it be similar to this year? Let's see what the experts think.
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What's in store for ASX REITs?
A shift in macroeconomic conditions is setting the stage for a potential recovery in ASX REITs.
Experts point to stabilising property values and easing interest rates as the two catalysts for a turnaround.
The Reserve Bank of Australia (RBA)'s recent comments on inflation moving toward target levels have fuelled speculation about rate cuts.
The market now sees a 73% chance of a rate cut to 4.1% (from a current 4.35%) in February next year, up from 62% in early December, according to data obtained from The Australian Securities Exchange (ASX).
Investment bank UBS says lower interest rates, by reducing borrowing costs and increasing property valuations, could signal "a turning point" for global REITs.
Meanwhile, my colleague Sebastian Bowen highlights the potential opportunities in Aussie REITs thanks to the global demand for data centres.
Global asset manager Brookfield Asset Management, according to Bloomberg, highlighted the potential for a "robust recovery" in the sector next year.
This puts those in the office REIT sector in a good position, Brookfield says.
What names stand out?
Goodman Group (ASX: GMG) is one key name that stands out for its recent move into data centres
As I covered in September, the company has about $13 billion of developments in its pipeline, including several major data centre projects.
According to my colleague James Mickelboro, Morgan Stanley is bullish on the ASX REIT, rating it a buy with a $42.40 price target.
Centuria Office REIT (ASX: COF) is one beaten-down name with a footprint in the Australian office real estate sector.
Shares are down 14% this year, hitting 52-week lows earlier this month.
While office properties have struggled in recent years, according to The Motley Fool's Tristan Harrison, Centuria's diverse portfolio outside Sydney and Melbourne's CBDs is a standout feature.
The REIT is forecasting a distribution yield of over 9% for FY25.
A bright outlook for ASX REITs?
Several experts are bullish on ASX REITs in 2025. These opinions are based on stabilising property values, easing credit conditions, and potential interest rate cuts.
Whether or not this materialises is another thing. But we have seen global central banks lowering interest rates in 2024. Australia hasn't joined the party yet, but the market thinks it will early next year.
