Going Global – The Opportunity
Australia has one of the highest securitised property markets in the world with a high proportion of investment grade retail property owned by institutions. The availability of investment grade property in Australia is reducing and represents only two percent of the world market.
Investing in overseas retail property can provide investors with the potential to:
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Access better returns;
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Gain real diversification through direct exposure to the performance of local economies, given the localised nature of retail property; and
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Reduce risk by accessing a broader and deeper selection of retailers.
Why Consider the US?
US Property is Attractive – The US is one of the largest property markets in the world and has one of the wealthiest populations. Taking into account cultural and commercial similarities, Centro believes it should be a location of choice for Australian investors looking offshore.
Deeper Property Pool – With 554 million square metres of retail space, 48,500 shopping centres and 201 million shopping centre visits per month, the US retail property market provides Australian investors with greater access to quality retail investment opportunities.
Attractive Returns – US direct retail property offers attractive investment characteristics; stable returns, low volatility and low correlation to the major Australian asset classes. These benefits are enhanced when combined within a diversified investment portfolio. An exposure to US direct retail property significantly decreases the probability of the portfolio achieving negative returns. A detailed analysis of the US and Australian direct retail property markets has revealed some striking similarities from a risk return perspective over the longer term. Both retail property sectors have shown relatively high and consistent risk adjusted returns.
Diversification Benefits – US direct retail property provides investors with diversification through exposure to a broad and different range of property, retailers, economic markets and the potential for different economic cycles. As part of a balanced portfolio, it also provides diversification opportunities due to its low, and even negative correlation to major Australian asset classes.
Other Benefits – In addition, the US offers the following attractive features in comparison to Australia:
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Lower Property Acquisition Costs – The US typically has lower acquisition costs and transfer taxes (stamp duty);
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Broader Retailer Market – The US has a much broader and deeper selection of retailers. This has the potential to reduce risk by increasing the leasing opportunities;
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Lower Market Consolidation – The US property market has not experienced the same level of ownership consolidation as Australia and has a significantly lower level of securitisation;
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Wealthier Population – Average US household income is A$62,949 compared with the average household income in Australia of A$44,720; and
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Lower Inflation/Interest Rates – Currently inflation and interest rates are lower in the US resulting in retail property tending to have potentially higher real yeilds for investors.
Centro – A Trusted Australian Manager
When investors consider the opportunities that overseas investment offers they are often concerned about currency issues and who is going to manage their assets in an offshore destination. As an owner and manager Centro understands these concerns. Investors can have peace of mind knowing that Centro manages these complex tax, legal and foreign exchange issues for them.
Investors want a manager who can actively manage the properties and utilise local knowledge and expertise to maximise value. Centro has a dedicated team on the ground in the US with local expertise and experience. Combining this with its proven track record, Centro is ideally positioned to package international property investment opportunities for Australian investors.