There is a big deviation, with alternative asset manager Qualitas expected to grow earnings by 44 per cent in the current year, while the more conventional Mirvac, Charter Hall and Growthpoint Properties are expected to shrink their profits by 2 to 5 per cent. UBS analysts believe valuations are “closer to the trough”, with transaction volumes and debt markets gradually improving.

Given the tougher conditions for residential developers and lower inflows and margins for the fund managers, UBS sees flat earnings growth in the current year (excluding Goodman) and 1.8 per cent growth in 2025-26.

“From here, we expect low to mid-single-digit earnings growth with limited new supply of assets supporting rents over the medium term,” the firm says.

At the same time, consumers remain resilient, which bodes well for shopping centre REITS such as Vicinity Group and Scentre Group.

In particular, investors will be laser-focused on the performance of the patchy office sector.

JLL Research reports national “net absorption” of 7700 square metres of office space in the June quarter, which means more new space was tenanted than vacated. But the trends varied, with 10,000 sq m of positive absorption in Sydney but a negative 26,600 sq m in Melbourne.

The Sydney figure also masks a big variation between well-performing prime space and secondary digs. While national vacancies stood at 15.4 per cent, the Melbourne number swelled to 19.6 per cent – the highest since 1995.

Still, fewer tenants are seeking to hive off their excess space. CBRE reports that office sub-leasing volumes fell by 38 per cent in Sydney and 11.8 per cent in Melbourne in the June half. As at the end of June, there were 49 national sublease listings of more than 1000 sq m, compared with 65 in December 2023.

However, Macquarie still forecasts further devaluations of 22 per cent for offices – its least preferred sector – compared with a 4 to 5 per cent decline for retail and industrial.

Meanwhile, JLL reports a surge in transaction activity, which will further provide proof about whether current valuations are justified.

There were $11.5 billion of deals across the office, industrial and retail sectors in the June half, with $7.1 billion transacted in the June quarter. In the June 2023 half, $8.3 billion of properties changed hands.

Offshore investors are reappearing, with $2.8 billion of purchases in the June half, compared with $3.2 billion for the whole of 2023. The sellers predominantly were REITS, notably Mirvac and Dexus.

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