Australian REITs with exposures to the retail and office sectors are facing weak rental rates, amid structural changes that have arisen from COVID-19.
This was the assessment provided by Fitch Ratings in a recent report on the sector.
In the report, Fitch noted that Australia’s major REITs have reported largely resilient results for the financial year ended June 2021.
Retail visitations and cash collection rebounded strongly once pandemic-related lockdowns were lifted.
Meanwhile, office REITs were protected by long-dated weighted-average lease expiries.
However, office occupancy rates are weakening on new supply and the emergence of structural changes, said Fitch.
“We believe this will remain the greatest challenge for Australia’s major REITs, although the high quality of their portfolios should protect them from significantly higher vacancy levels”, the agency noted.
Fitch’s report on Australian REITs can be downloaded here.