Malls to blame for property's slower year

It is the first time the local REIT sector has underperformed since 2013 and just the second year of underperformance in the past seven years, according to JPMorgan analysts Richard Jones, Ben Brayshaw and Krzysztof Kaczmarek.

On a broader comparison, Australian REITs were outgunned by wholesale property fund returns – 12.2 per cent – and direct property, which gave back 12 per cent.

On a global scale, the local property stocks were pipped by most of major global REIT markets except Japan – which booked negative 4.9 per cent – and the US, which delivered a 3.9 per cent return, the JPM analysts noted in their 2017 review.

Investor concerns

The European and Asian markets, excluding Japan, outperformed Australia.

While most REITs delivered positive total returns, it was the major shopping centre owners Scentre, which owns Westfield malls in Australia, and Vicinity which dragged the overall sector backwards.

Scentre booked negative 4.8 per cent for the 2017 year as it “bore the brunt of investor concerns over the soft retail environment and the entry of Amazon into the Australian market”, according to JPMorgan.

Similar concerns weighed on Vicinity which returned negative 3.3 per cent.

With a busy transactions market in 2017, fund managers went ahead. Goodman returned 21.9 per cent, Charter Hall booked a 34.5 per cent return and Abacus recorded a whopping 44.6 per cent.

Deal flow was strong, with $28.3 billion in transactions, up from $17.1 billion in 2016 and $26.6 billion in 2015, on JPMorgan figures.