Analysts say ASX real estate investment trusts (REITs) are looking more attractive for investment now that interest rates are on the way down worldwide.
High or rising interest rates tend to hurt REITs because their debt becomes more expensive to service.
REITs usually have a fair bit of debt on their balance sheets to fund property purchases and developments.
Higher rates also make ASX REITs less appealing to income investors.
This is because investors can attain risk-free yields from bonds or term deposits at a similar rate of return instead.
But the tide is turning, with central banks in a range of nations, including the United States, Canada, England, the Euro Zone, and Sweden, reducing rates last year.
The Reserve Bank of Australia is expected to follow suit at some point in the first half of 2025.
This is why top broker JP Morgan says it's time to buy ASX REITs.
According to The Australian, the broker says interest rate cuts could lift earnings across the ASX REIT sector.
And as we all know, higher earnings have a direct impact on distributions (or dividends).
2025 dividend forecasts for ASX REITs
Let's take a look at the forecast 2025 dividend yields for the largest ASX REITs by market capitalisation.
For the purposes of this article, we'll focus on REITs with market capitalisations above $7 billion.
The following chart shows the consensus analysts' forecasts for annual distributions in 2025.
These forecasts have been published on the CommSec trading platform.
We compare these forecasts to the 2024 distributions and calculate the trailing and forecast dividend yields based on ASX REIT share prices at the time of writing.
These REITs are listed in order of market cap from largest to smallest in the group.
| ASX REIT | 2024 dividend | Trailing yield | Forecast 2025 dividend | Yield |
| Goodman Group (ASX: GMG) | 30 cents | 0.8% | 30 cents | 0.8% |
| Scentre Group (ASX: SCG) | 17.2 cents | 4.7% | 17.5 cents | 4.8% |
| Stockland Corporation Ltd (ASX: SGP) | 24.6 cents | 4.8% | 25.1 cents | 4.9% |
| Vicinity Centres (ASX: VCX) | 11.8 cents | 5.4% | 12.4 cents | 5.6% |
| GPT Group (ASX: GPT) | 24 cents | 5.2% | 26 cents | 5.7% |
| Mirvac Group (ASX: MGR) | 10.5 cents | 5.3% | 9 cents | 4.5% |
| Dexus (ASX: DXS) | 48 cents | 6.8% | 37 cents | 5.2% |
| Charter Hall Group (ASX: CHC) | 45.1 cents | 2.9% | 47.8 cents | 3.1% |
So, analysts expect GPT Group to pay the highest dividend yield among this group of ASX REITs in 2025.
Is it time to buy ASX REITs?
Many analysts are optimistic about ASX REITs for 2025.
Aaron Binsted, portfolio manager of Lazard's Australian equity income fund, says ASX REITs are likely to deliver better returns for income investors this year than bank shares.
As reported in the Australian Financial Review (AFR), Binsted points to Charter Hall Retail REIT (ASX: CQR) and Vicinity Centres as examples offering "modest growth but good yields of 5 to 6 per cent".
JPMorgan analyst Richard Jones said investors are showing new interest in ASX REITs beyond the sector's largest company, Goodman Group.
As this chart shows, Goodman Group has outperformed its peers listed above in terms of share price growth since interest rates began rising in May 2022.
This is mainly due to the artificial intelligence (AI) megatrend and Goodman's pivot into data centres.
There's been a mixed performance from other ASX REITs over the period.
James said investors currently see the ASX REIT sector as defensive amid expectations of lower earnings growth across the wider share market in 2025.
He comments:
REIT earnings are at an inflection point, having seen growth wiped out by rising debt costs over the past two years.
We expect sector earnings growth to turn positive this year and accelerate over the next two years, offering an attractive above-trend three-year EPS compound annual growth rate of 7.8 per cent or 4.4 per cent ex-GMG.
JPMorgan has an overweight rating on Vicinity Centres and Abacus Storage King (ASX: ASK).
Another broker, Citi, has buy ratings on Goodman, Stockland, Scentre, GPT Group, National Storage REIT (ASX: NSR), and Ingenia Communities Group (ASX: INA).
According to The Australian, CLSA has an overweight rating on ASX REITs.
Analysts Druce and Calvetti said:
We expect the residential sector to pick up again on rate cuts, after constant pressure on volumes and margins, from high construction costs, subcontractor delays and elevated interest costs.
Generally, we are more comfortable asset values have troughed. We see more devaluations in office, between 3 per cent to 5 per cent based on transactions in the market.
