Macquarie says this real estate company could deliver close to 20% upside

Demand for retail tenancies will outstrip supply in coming years, boding well for this major player.

Key points
  • Strong retail fundamentals will be a tailwind for GPT Group.
  • Population growth is set to outstrip retail tenancy growth.
  • GPT also has a strong development pipeline in the sector.

Investors in real estate outfit GPT Group (ASX: GPT) recently had a briefing from the company about how it's travelling, and the analysts at Macquarie certainly liked what they saw.

That's probably no surprise if you go back and have a look at their recent comments to the market.

In August, the company released its half-year results, and a stand-out was the occupancy levels in its retail portfolio, which were running at a hard-to-beat 99.7% at the end of the financial year.

Happy girl shopping at clothes shop.

Image source: Getty images

Retail running hot

The recent investor day briefing focused on the retail portfolio, which Macquarie analysts said accounted for 39% of GPT's $12.2 billion investment portfolio.

The Macquarie research note sent to clients this week said that GPT was outperforming its peers on the retail front, and the company's retail division had "improved fundamentals, stabilised valuations, capital inflow and expected income led returns''.

Some of the factors feeding into this were strong population growth projections, which were running at 7.3% over a five-year forward period, while growth in retail stock was only forecast to be a modest 0.9%.

The Macquarie note says:

The retail sector is supported by attractive fundamentals which GPT is well-placed to capitalise on. More broadly, execution of funds strategy offers upside potential to valuation in the medium-long term.

Growth story

GPT also had a strong retail development pipeline, with $1.5 billion in projects to be rolled out, including the Rouse Hill Town Centre in Sydney, which the analysts toured.

That project is expected to be completed in the fourth quarter of 2026 and adds 50 new tenancies in the area.

As Macquarie's analysts write, GPT is also targeting further growth.

GPT is targeting quality retail assets, in quality locations with a strong growth profile and good socioeconomics. Location preference is informed through catchment analysis, with leasing deals also benchmarked against the breadth of customer demand for a tenant in a specific area.

The strength of the retail sector was outlined in the Macquarie report, using the Highpoint Shopping Centre as an example, with that site fully leased out, "with 45 national tenants wanting to double in size and create flagship stores''.

Macquarie has an outperform rating on GPT shares and a valuation of $6.26 per share compared with the price at the time of publication of $5.44.

Factoring in dividends, they are expecting a total shareholder return over 12 months of 19.56%.

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Real Estate Shares

A smiling businessman sits at a desk with bags of money, indicating a share price rise after funding has been approved
Real Estate Shares

Lendlease Group extends MSG North sale deadline, outlines possible funding requirement

Lendlease Group extends MSG North sale deadline, with possible $160m funding required if the deal collapses.

Read more »

House models with REIT written on one.
Real Estate Shares

2 ASX real estate funds that could return 23% to 35%

Real estate trusts have been oversold in the past couple of months, with brokers saying this has created a buying…

Read more »

Two business people face off across the boardroom table.
Real Estate Shares

Ingenia Communities receives further revised $5.25 takeover proposal

Ingenia Communities has received an updated $5.25 takeover proposal from Warburg Pincus, with the board still assessing next steps.

Read more »

House models with REIT written on one.
Real Estate Shares

5 buy-rated shares in the ASX real estate sector to consider

Strong occupancy rates have some real estate companies looking solid.

Read more »

A corporate man crosses his arms to make an X, indicating no deal.
Real Estate Shares

Ingenia Communities rejects revised $5.05 takeover offer

Ingenia Communities has rejected an improved Warburg Pincus takeover bid, saying it undervalues the company.

Read more »

IT specialist using laptop in data centre full of server racks.
Real Estate Shares

Goodman Group vs Nextdc: Which stock is the better buy today?

Goodman Group and Nextdc are both ASX leaders in AI infrastructure. Which share is better value today? Here’s my verdict.

Read more »

two men in suits shake hands at the top of a shined wood boardroom table.
Real Estate Shares

Brookfield moves to acquire Reliance Worldwide Corporation at a 43% premium

Reliance Worldwide shares are in focus as Brookfield struck a US$3.38 per share takeover deal with a 43% premium and…

Read more »

Image of a shopping centre.
Real Estate Shares

Vicinity Centres: 2026 Capability Showcase highlights Chadstone and Chatswood Chase

Vicinity Centres boasts gains from Chadstone and Chatswood Chase upgrades, highlighting premium asset focus and solid financial health in 2026.

Read more »