AREITs: The 2025 Essential Five Minute Guide

If you’re an investor looking for regular, sustainable income, you’ve probably heard of Australian Real Estate Investment Trusts (AREITs). They are tailor made for people like you. 

What is an AREIT?

For a long time, AREITs—Australian Real Estate Investment Trusts—were known as listed property trusts, a commercial property investment structure that allowed ordinary investors to own a portion of a commercial property portfolio without being a millionaire. Examples include Scentre Group, Goodman Group and Stockland.

An AREIT allows you to invest in commercial property through the purchase of a part of its commercial property portfolio, bought and sold on the Australian Stock Exchange (ASX) like any other share.

AREIT ownership entitles you to an equivalent portion of the dividends it pays - called ‘distributions’, or yields, in the AREIT - and the capital growth it delivers.

This comes without the risk, expense or capital outlay of purchasing and owning an entire commercial property yourself. Of course, there are pros and cons, but for income investors they can be an attractive option.

What are the key differences between residential and commercial property investing?

For decades, residential property investing has been the dinner party topic of choice; buy a place (assuming you can afford the deposit) and negatively gear it on the basis that the capital growth will exceed the rental yield.

Commercial property isn’t like that. The AREIT sector’s focus is on delivering an attractive, stable yield, primarily from the rent collected from tenants. AREITs are therefore a more defensive investment where capital growth is complimentary to the yield.
Commercial property investing tends to attract investors primarily focused on income whilst residential investing emphasises capital growth.

There are other differences, including ease of access to markets and liquidity, but buyer motivation and the source of future returns are the key differences between investing in commercial versus residential property.

How do AREITs work?

Before the advent of AREITs, the only way to invest in commercial property without buying a building outright was via a property syndicate, an illiquid fund that used to be the preserve of specialist investors.

AREITs allow the purchase (and future sale) of a holding in a commercial property portfolio in an easy, low cost way. Anyone can now access commercial property indirectly, buying and selling small parcels of real estate much as one would an ordinary share, with minimal upfront capital commitment.

AREITs, a publicly-listed company, makes this possible by pooling investor funds much like a managed fund. But instead of buying shares, an AREIT purchases and manages a portfolio of commercial properties.

AREIT managers are responsible for the upkeep of their buildings, leasing the space and collecting the rent from tenants, charging a fee for their services. In return, AREIT investors avoid the hassles of owning and managing commercial property.
AREIT managers are also responsible for maximising and distributing the income the AREIT receives, primarily from rents, to their investors. This occurs through a structure commonly known as a stapled security, which can provide certain tax benefits.
It is the rent, asset values and the value that the market places on those things that typically determine an AREIT’s value over time.

What type of AREITs can I invest in?

AREIT investing is usually categorised into four real estate sectors:
Retail - This includes buildings like shopping centres - your local Westfield for example – large-format, service stations and convenience-based outlets.

Office - These are the towers that mark the skyline of Australia’s major cities and the office parks that dot suburban areas. They tend to be occupied by larger local and multinational businesses and increasingly the small to medium-sized enterprises.

Industrial - From simple warehouses and distribution centres to highly specialised facilities, these are the places where things are made, stored, and new products are developed.

Infrastructure - More recently, AREITs have emerged that own diverse infrastructure assets, including data centres, healthcare facilities, childcare centres, service stations, airports, land lease communities, self-storage units and mixed-use developments.

There are over 40 AREITs listed on the ASX as of 2025, offering varying degrees of exposure to the main commercial property sectors.

What is the average return on AREITs?

In the decade to 5 March 2025, the S&P/ASX 300 AREIT Index delivered an average annual total return of 7.25%. A useful comparison to this performance is the yield on the 10-year Australian bond, which was 2.59% over the same period.
As an example of the yields on offer, as of 27 March 2025 the Dexus AREIT Fund had a running yield of 5.95% 

Are AREITs a good investment in 2025?

Judging a return should be assessed considering the risks taken to achieve it. Different risks are attached to different assets. Bonds, for example, are government-guaranteed in a way that every other investment is not.

The case for any investment depends on your circumstances, tolerance for risk and investment objectives. External factors such as the state of the economy, interest rates, the investing environment of property markets and price volatility are all risks to incorporate in your decision making.

In 2024, the S&P/ASX 300 AREIT returned 17.6%, outperforming the benchmark ASX 300 index by 6.2%. In February of 2025, Dexus argued that ‘despite the impressive recent returns, many AREITs remain undervalued, some substantially so’ and that ‘there is still time to profit from the recovery.’

If you’re in search of regular, reliable income and have an investment time frame of 5-7 years, AREITs are worthy of your consideration. 

How do I choose an AREIT?

In our view there are six factors to consider; 

1. Quality of management - This includes factors like the ability to achieve rental increases, sensibly manage properties, negotiate with tenants, provide reliable dividends and manage debt. All will help you build an overall picture of management quality and skill.

2. Portfolio diversification - No investment should be made in isolation. If your AREIT portfolio is overexposed to one sector your diversification risk increases. Consider each investment considering how it will affect your overall portfolio.

3. Earnings, dividends and growth - Whilst past performance is no guarantee of future returns, examining an AREIT’s financial history and how it impacts investor returns will give you a better feel for the company and its assets.

4. Debt levels - Debt is an important factor in every business and AREITs are no different. Prior to the global financial crisis, the AREIT sector went on a debt binge. Since then, the sector has returned to its knitting, but debt levels should always be watched carefully.

5. Exposure to non-rental sources of income - AREITs are unusual in that regulations permit them to generate up to half of their income from non-rental sources. Income from funds management and property development - the typical sources of non-rental income for AREITs - is generally more volatile. This is particularly true of Goodman Group , which generates well less than half of its earnings from traditional rent collection. 

6. Use other valuation metrics - Here, you have a smorgasbord of options. Take your pick from net asset value (NAV), vacancy rates, price-to-funds-from-operations (P/FFO), price-to-book ratio, capitalisation rate and weighted average lease expiry (WALE).

I don’t want to build my own AREIT portfolio. What are my options?

If you don’t have the time, skills or inclination to build your own AREIT portfolio but still want to access the benefits and income stream of AREIT investments, you have a few choices.

The first is to invest in an ASX-listed property securities fund like the Dexus Convenience Retail REIT, which owns a portfolio of service station and convenience retail assets across Australia’s eastern seaboard. As a listed entity, its stock can be bought and sold like ordinary shares.

The second option are unlisted funds like the Dexus AREIT Fund, managed by a team of expert commercial property analysts that aim to maximise your returns and income stream. For a fee of less than 1%, a fund such as this delivers instant diversification, simple administration and a monthly income distribution, leaving you free to get on with your life. Although because these funds are unlisted, liquidity isn’t as assured as a listed fund.

The third option are property syndicates, a form of collective real estate where investors pool their money to purchase and manage a property or a portfolio of properties. This structure delivers a higher degree of visibility and financial involvement in the properties, but also additional risks and even lower liquidity and diversification.     

Key takeaways:

● An Australian Real Estate Investment Trust (AREIT) is a company that owns and operates income-producing commercial properties;

● AREITs can be bought and sold just like ordinary shares;

● As most of their returns come from distributions, investors reliant on income tend to be attracted to AREITs;

● AREITs offer many different types of commercial
property investment exposure, from shopping centres, offices and warehouses to healthcare buildings and data centres;

● If you don’t have the time or skills to build your own AREIT portfolio, consider a property securities fund like the Dexus AREIT Fund.