Despite the threat of higher bond yields, the listed real estate sector continues to perform quite strongly. After a soft start to the year, the S&P/ASX 200 real estate sector returned 7.57% in April and May, to be in the black for the year with a total return of 1.86%.
Support for listed property trusts reflects the strong demand for commercial property, particularly in the Sydney and Melbourne CBD markets, where vacancy rates are low and rents have moved higher. Further, interest rates in Australia seem to be going nowhere quickly, with the RBA cash rate stuck at 1.5%.
An alternative to investing in a listed property trust is to invest in an unlisted trust. Typically, these pay higher yields than listed trusts, are either single asset or own a less diversified mix of property assets, and are smaller in size. The trade off, of course, is that there is no liquidity, so investors typically agree to a timeframe upfront for an exit path to sell the assets and wind up the fund.