Bell Potter released its weekly analysis on real estate and ASX REIT stocks on Sunday.
The report provides an overview of the market as well as recommendations.
Broadly speaking, this week's report discussed the sharp undersupply in Australia's apartment housing pipeline.
Despite already accounting for twice the pace of household formation compared to owner-occupied housing, apartment supply remains insufficient.
More concerning is that the current 1–2 year forward pipeline is projected to fall 30–40% short of demand targets, even as vacancy rates in key gateway cities remain critically low at ~2% or below (well under the structural 2–3% benchmark).
Additionally, net overseas migration is forecast to add 1.1 million people over the next five years, while apartment commencements have dropped to 13-year lows.
Developers with strong pipelines on foot are well placed to benefit from the secular tailwind ahead in our view.
Based on this analysis, let's look at three recommendations from the broker that stood out.
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Buy – Dexus Convenience Retail REIT (ASX: DXC)
Dexus is a real estate investment trust that wholly owns a portfolio of service station and convenience retail assets.
It operates across the office, industrial, retail, infrastructure, healthcare and alternatives sectors.
Bell Potter is optimistic on this ASX REIT for a few reasons, including its high distribution yield, and discounted trading price.
It posted solid FY 25 results, and the broker believes it is well placed to deliver defensive and growing earnings and NTA.
It has a price target of $3.45, which indicates 15.38% upside from yesterday's closing price of $2.99.
Hold – HomeCo Daily Needs REIT (ASX: HDN)
The company is an Australian property group focused on the ownership, development, and management of Australian shopping centres.
The trust owns more than 50 convenience-based shopping centres in five Australian states, targeting neighbourhood retail, large format retail, and health and services sub-sectors.
Bell Potter lists this ASX REIT as a hold, with a price target of $1.40. It closed trading yesterday at $1.36, suggesting it is close to fair value at its current valuation.
Additionally, Bell Potter said FY25 results were in line with expectations, as the company focuses on development pipeline redeployment.
Sell – Centuria Office REIT (ASX: COF)
The company is Australia's largest pure-play office real estate investment trust (REIT). It owns a $2.3 billion portfolio of office and commercial property assets throughout Australia.
Bell Potter has a sell recommendation and $1.10 price target.
Subsequently, this indicates a downside of 7.56% from yesterday's closing price.
Bell Potter said it anticipates continued declining fundamentals for the office subsector and expects FY 26 to be another tough year for this ASX REIT.
