How are interest rate cuts impacting ASX-listed REITs?

Deep dive into REITs

In this week’s edition of IG Macro Intelligence, we examine financial year (FY) 2025 earnings from ASX-listed real estate investment trusts (REITs).

Sector rebound

Improving economic conditions and expectations of further interest rate cuts have driven a notable recovery in the S&P/Australia 200 (ASX 200) A-REIT Index (XPJ).

The index surged more than 13% in the June quarter, taking its annual gain to almost 12% – nearly in line with the Australia 200. The June quarter uptick was sparked by diminishing macroeconomic concerns since the Liberation Day fuelled April slump and a more favourable investment climate.

 S&P/ASX 200 A-REIT index

Data from Cromwell Funds Management shows Goodman Group led A-REIT gains with a 21% rise in the June quarter, nearly recouping 2025 losses. Strong residential housing growth saw Charter Hall Group gain just over 20% amid a stabilising market.

Office sector performance lagged, with limited valuation changes and mixed rental trends. Shopping centres rebounded, though below the index, with Unibail-Rodamco-Westfield up 12.4%. Residential developers benefited from widespread house price growth, boosting stocks like Cedar Woods Properties by more than 35% in the quarter.

Warehouse watch

Centuria Industrial REIT (ASX:CIP)

Centuria Industrial REIT focuses on industrial properties in the real estate market and is Australia’s largest listed pure-play industrial fund. It reported a 25% rise in full-year revenue, while net profit exceeded $133 million. The trust also announced a $60 million share buyback, reflecting strong performance and investor confidence.

Shares in Centuria Industrial REIT hit a 10-month high in the wake of its results and are up almost 17% year to date. ASX Tradewatch data shows shares are in a medium-term rally, with the 5-day moving average (MA) above the 50-day and the 20-day MA rising.

Centuria Industrial REIT daily chart

Analysts are also positive on its outlook, with the average broker recommendation being a 'buy' and a target price of $3.59, suggesting Centuria Industrial REIT can rally a further 8%.

Centuria Industrial REIT historical trends and price targets

Bell Potter analysts lifted their price target on the stock to $3.65 from $3.35 following the results, highlighting the $60 million buyback, equivalent to around 3% of shares, as a positive momentum signal. They also see potential upside of around $0.018 per share from re-leasing vacancy space, with occupancy holding around 95.1%.

Centuria Industrial REIT buy/sell indicators and analyst projections

Highway to growth

Dexus Convenience Retail REIT (ASX:DXC)

Dexus Convenience Retail REIT owns high-quality Australian service stations and convenience retail assets.

Dexus Convenience Retail REIT posted a modest drop in revenue and funds from operations for the year to 30 June 2025, with revenue from ordinary activities down 2% and FFO slipping 1.5%. However, net profit jumped sharply from $3.4 million to $39.4 million, and its market capitalisation rose 12.6%, signalling strong investor confidence despite softer operating results.

Dexus Convenience Retail REIT daily chart

ASX Tradewatch data shows shares in a near-term uptrend confirmed by the 20-day MA rising, implying investors see further upside for profit.

Analysts are also bullish on the stock, with the average target price of $3.25, as surveyed by Refinitiv, suggesting it can rise another 5%.

Dexus Convenience Retail REIT historical trends and price targets

Outlook

Goodman Group (ASX:GMG)

Goodman Group is a major component of the A-REIT index and is due to report later in August. Its third-quarter (Q3) operational update indicated strong performance with a focus on logistics and data centres, while it also recently established a Hong Kong data centre partnership worth more than US$2.7 billion.

Meanwhile, as more employees return to the office, analysts say the outlook for the office sector is improving and should bolster demand and occupancy rates soon.

Analysts expect the A-REIT sector to gain from anticipated interest rate cuts in 2025, with supportive macroeconomic trends and sector-specific gains pointing to a favourable near-term outlook.