2020 has been a tough year for ASX real estate investment trusts (REITs). Many of the largest REITs operate in segments hit hard by the coronavirus pandemic.
However, it’s not all doom and gloom for the property sector. I think there are a few factors that support a strong outlook for REITs in 2021.
Why ASX REITs could surge higher in 2020
It’s important to note that different REITs have different sector exposures. Some have exposure to retail, office, logistics, residential or commercial markets among others.
Scentre owns and operates Westfield shopping centres across Australia and New Zealand. Tight restrictions have reduced foot traffic and put more pressure on tenants, which has a knock-on effect to Scentre’s earnings.
2021 could see eased restrictions and potentially even a vaccine. Either way, I think it’s good news for Scentre provided the shift towards online retail isn’t permanent.
It’s not just ASX retail REITs I like right now. The Mirvac Group (ASX: MGR) share price is one on my watchlist.
Mirvac is diversified across a number of sectors with exposure to retail, residential, industrial and office assets. It’s shares are down 31.7% in 2020 but I think there’s potential for long-term growth.
The ASX REIT still owns and operates some high-quality assets across the company. That leaves it well-placed to unlock value and cash flow even if there is some short-term pain in the meantime.
I also like the National Storage REIT (ASX: NSR) right now. National Storage shares are down 1.4% this year and haven’t been hit as hard as many other Aussie REITs.
I think 2021 could see heightened activity in the residential property space. Whether that’s in a downward or upward direction, I don’t think it really matters for National Storage.
More people moving residences is good for the self-storage industry. That means more earnings for National Storage which flows through to investors with higher dividends.
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Returns As of 6th October 2020
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.