Investing in REITs allows investors to gain exposure to commercial property without needing to buy or manage property directly. Real Estate Investment Trusts (REITs), commonly referred to as A‑REITs in Australia, pool investor capital to invest in income‑producing real estate assets such as offices, logistics facilities, retail centres and social infrastructure.
Investing in REITs allows investors to gain exposure to commercial property without needing to buy or manage property directly. Real Estate Investment Trusts (REITs), commonly referred to as A‑REITs in Australia, pool investor capital to invest in income‑producing real estate assets such as offices, logistics facilities, retail centres and social infrastructure.
REIT investing is widely used by Australian investors, advisers and institutions seeking property exposure as part of a diversified investment portfolio.
On this page:
- What is a REIT?
- How do REITs work?
- What do REITs invest in?
- Types of REITs in Australia Why invest in REITs
- What are the risk of investing in REITs
- How to invest in REITs in Australia
- REITs vs property funds vs direct property
- How Charter Hall approaches property investment with REITs
What is a REIT and A-REIT?
A Real Estate Investment Trust (REIT) is an investment structure that owns, operates or finances income‑producing real estate. Investors buy units or securities in a REIT and gain exposure to the underlying property portfolio rather than owning property directly.
In Australia, these vehicles are commonly known as A‑REITs (Australian Real Estate Investment Trusts). A‑REITs may be listed on the Australian Securities Exchange (ASX) or offered as unlisted property funds, each with different risk and liquidity characteristics.
How do REITs work?
REITs pool money from many investors to acquire and manage property assets through these investment vehicles. These assets generate income, typically through rental income paid by tenant customers. After expenses such as operating costs and debt servicing, REITs typically make distributions—regular cash payments to investors—from a large share of their taxable income each year, often 90% or more.
REIT investing enables investors to access professionally managed property portfolios, with asset selection, leasing, maintenance and long‑term strategy overseen by specialist property and investment teams. In Australia, these vehicles are commonly called A‑REITs; Australian REITs are often structured as unit trusts and, when quoted on the ASX, may also be described as listed property trusts.
REIT investing vs buying property directly
This comparison highlights why investing in REITs in Australia is often used by investors seeking property exposure without the responsibilities of direct ownership; unlike direct property, they are generally easier to trade and involve less hands-on management.
Comparison chart
Feature | REIT investing | Direct property investment |
|---|---|---|
Access | Buy units or securities | Buy a property |
Capital required | Usually lower | Usually higher |
Diversification | Can access multiple assets | Usually one or few assets |
Liquidity | Listed REITs can be traded on market | Property sales can take time |
Management | Managed by professionals | Owner manages or appoints manager |
Income | Potential distributions | Rent after expenses |
What do REITs invest in?
REITs may invest across different real estate sectors, depending on their strategy, including:
Office
Office REITs invest in commercial office buildings, often located in CBDs or major metropolitan precincts. Returns are influenced by tenant demand, lease terms and broader economic and employment conditions.
Industrial & Logistics
Industrial & Logistics REITs focus on assets such as warehouses, distribution centres, logistics facilities and industrial buildings. Demand for these properties is often linked to supply chains, population growth and e‑commerce activity.
Retail
Retail REITs invest in retail shopping centres, retail precincts and convenience‑based retail assets. Performance is influenced by tenant mix, customer foot traffic and consumer spending patterns.
Social Infrastructure
Some REITs invest in social infrastructure and specialist assets, including healthcare facilities, childcare centres and education properties. These assets are often supported by long‑term leases and essential service demand.
Diversified property portfolios
Diversified REITs hold assets across multiple property sectors and locations, helping spread risk and reduce reliance on any single property type or market segment.
Types of REITs in Australia
There are several types of REIT structures available to Australian investors. Each differs in how it is accessed, how it is priced and how liquid the investment may be.
Listed A-REITs
Listed A‑REITs trade on the ASX stock exchange, similar to shares. Investors can buy and sell units on the market, offering relatively high liquidity and transparency. Prices fluctuate with market conditions and investor sentiment, which can increase volatility.
Unlisted property funds
Unlisted property funds are accessed directly through a fund manager or adviser. Some unlisted property funds appeal to sophisticated investors seeking a more stable income profile, although access (e.g. higher minimum investment) and liquidity terms vary. These REIT investments may offer more stable valuations, though liquidity and withdrawal terms vary by fund.
Sector-specific REITs
Sector‑specific REITs focus on a single property type, such as industrial, office or retail. This can allow targeted exposure, but may involve higher concentration risk.
Diversified REITs
Diversified REITs invest across multiple property sectors and locations. This approach can help balance risk while still providing exposure to commercial property markets.
Stapled securities
Stapled securities combine two or more linked entities, often pairing a property trust with a management or operating company. These securities are traded together and are a common structure in the Australian REIT market.
Why invest in REITs?
There are several types of REIT structures available to Australian investors. Each differs in how it is accessed, how it is priced and how liquid the investment may be.
Access to commercial property
REITs provide exposure to property through listed investment vehicles, giving investors access to large‑scale commercial assets that are typically difficult or costly to acquire directly, such as office towers, logistics hubs or retail centres.
Potential income
Many REITs aim to generate regular rental income from tenant customers, supporting a consistent income stream that is primarily derived from rental income, although distributions are not guaranteed. These distributions are generally taxed as ordinary income, so investors should consider the tax implications.
Portfolio diversification
Property returns may behave differently from other asset classes such as equities or fixed income. Including REITs in a portfolio can help diversify overall investment exposure.
Liquidity
Listed A‑REITs offer the ability to buy and sell units on the ASX, providing greater liquidity than direct property ownership. Liquidity for unlisted funds depends on the specific structure and withdrawal arrangements.
Professional management
REITs are managed by specialist property and investment teams who oversee asset management, leasing, maintenance, active property management and long‑term strategy, reducing the operational burden on individual investors. Professional management can also help protect asset value and support capital growth over time.
What are the risks of investing in REITs?
REIT investments are subject to risks, including:
Property market cycles
Changes in interest rates, including interest rate sensitivity, as higher rates can lift borrowing costs and make fixed-income alternatives more attractive
Tenant demand and vacancy levels
Asset value and valuation movements
Debt levels, as A‑REITs often borrow to fund large acquisitions and the gearing ratio can increase financial risk, especially in downturns
Liquidity constraints (particularly for unlisted funds)
Market volatility for listed A‑REITs
Understanding these risks is an important part of assessing suitability.
How to invest in REITs in Australia
1. Decide what kind of property exposure you want
Consider sector focus, income needs and time horizon.
2. Compare listed and unlisted options
Each offers different liquidity and pricing characteristics.
3. Review the REIT’s portfolio
Look at asset quality, location and diversification.
4. Read the relevant investment documents
Including product disclosure statements and fund reports.
5. Buy through the relevant channel
Such as the ASX through an online share broker, an adviser, or directly through a fund manager.
REITs vs property funds vs direct property
Comparison chart
Investment type | How it works | Potential advantages | Key considerations |
|---|---|---|---|
Listed A-REIT | Buy units or securities on the ASX; a REIT investment is generally easier to trade on market than direct property | Liquidity, lower entry point, transparency | Market volatility |
Unlisted property fund | Invest directly into a managed property fund | Direct property exposure, professional management | Liquidity and withdrawal terms vary; some options may suit sophisticated investors depending on access rules |
Direct property | Buy residential or commercial property yourself | Control over asset | High capital requirement, management burden, concentration risk |
How Charter Hall approaches property investment with REITs
Charter Hall is Australia's largest diversified property funds manager, with more than 35 years' experience managing high‑quality real estate across multiple sectors. By curating best-in-class commercial property portfolios and investment products, Charter Hall creates lasting value for its tenants customers and investors through all market cycles.
Learn more about investment options with Charter Hall here.
Frequently asked questions about REITs in Australia
Are REITs the same as property funds?
Some property funds are structured as REITs, while others are not. The structure affects liquidity, pricing and access.
How do I invest in REITs in Australia?
You can invest in REITs through the ASX, via a financial adviser or directly with a fund manager, depending on the structure.
What do REITs invest in?
REITs typically invest in income‑producing commercial property such as office, industrial, retail and social infrastructure assets.
Do REITs pay income?
Many REITs aim to distribute income, though this depends on performance and market conditions.
Are REITs risky?
Like all investments, REITs involve risk, including market and property‑specific risks.
Are REITs good for beginners?
REITs can offer accessible property exposure, but beginner investors should understand how REIT investing works in Australia and consider their risk tolerance.
Can I invest in REITs through my SMSF?
Many SMSFs invest in REITs, subject to trust deed rules and investment strategy considerations. SMSF investors should also consider tax implications, as regular income distributions from A-REITs are typically taxed as ordinary income and capital gains may affect overall returns within the fund structure.
What is the difference between listed and unlisted REITs?
Listed REITs trade on the ASX and offer liquidity, while unlisted REITs have different valuation and withdrawal characteristics.
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