Australia Real Estate: Delayed Hikes Open a Window for Australian Real Estate

Research evidence excerpt

Australia Real Estate: Delayed Hikes Open a Window for Australian Real Estate

Australia Real Estate

24 June 2026 Citi Research

We view gearing as the most critical differentiator — higher-geared names face disproportionate earnings pressure from each

incremental move in bond yields.

Our view on Scentre Group is constructive on a relative basis: its historically elevated weighted average cost of debt (driven by

subordinated hybrid notes) should normalise lower as those instruments are refinanced, creating a potential earnings tailwind

absent for most peers.

We view Goodman Group’s lower gearing and data centre-driven structural growth as offering a superior risk-adjusted earnings

profile in all but the most benign scenarios.

Cap Rates: Income Growth as the Critical Offset

We view upward cap rate pressure as manageable in retail and industrial, where CPI-linked lease income growth acts as a

natural offset to higher funding costs.

We view convenience retail and industrial assets with strong leasing profiles as best insulated; office assets (ex-premium CBD)

remain most vulnerable to valuation pressure.

We view premium CBD office as exhibiting relative resilience — a flight-to-quality dynamic supports valuations where income

growth and incentive adjustment are offsetting cap rate drift.

Figure 1. Gearing & Finance Costs

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Source: Citi Research, Company Reports

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