Fiona Clark is the Investor Relations Manager at Merricks Capital and is responsible for managing the firm’s platform fund investor relationships including investor onboarding and communication.

Fiona has experience across a broad range of financial markets including domestic and international equities, commodities, fixed interest and derivative products.

Fiona holds a Bachelor of Economics (Actuarial Studies) from Macquarie University. She also holds a Graduate Diploma of Applied Finance and Investment (FINSIA), a Graduate Diploma in Treasury Management (FTA in conjunction with Monash University) and a Diploma in Financial Services (Financial Planning).

The recent quarterly trading updates from the listed real estate companies have provided valuable insight about the various sectors, and while market conditions have been diverse and volatile, we can see emerging trends that are generally positive. A few observations and specific examples of the trends are highlighted below.

Office

The key themes in the office sector were varied levels of leasing activity (high levels of enquiry but some potential tenants delaying decision making), stable valuations, resilient occupancy levels and improving levels of rent collection. The outlook is also looking more positive, with several references to the continued importance of the office in a balanced and flexible working environment.

Dexus (DXS) - Rent collections remained at 94%, occupancy fell only slightly to 95.4% (from 96.5% at 30 June). Face rents have been holding across Sydney and Melbourne. Dexus believes the outlook for the office market has improved in recent months, noting employment in white collar industries was down just 0.2% in the year to August 2020. The company also pointed to a recent sale of a 22-level A-grade tower in the Melbourne CBD at an 11% premium to book value, which highlights the resilience of prime grade office values.
Mirvac (MGR) - Noted increasing evidence of tenants starting to encourage more of their staff to return to the office due to the benefits the physical workplace brings to culture, innovation, productivity and staff development. Occupancy was 97.4%.
Centuria Office REIT (COF) - Rent relief in the September quarter was down 58% compared to the June quarter and rent collection averaged 94%. Occupancy remained high at 95.9%. “Leasing activity also indicates that tenants continue to value office space as a central workplace, essential to maintaining productivity and culture… While immediate uncertainty resulting from COVID-19 remains, the medium to long-term outlook for high quality office assets remains positive, as evidenced by strong recent investment sales for comparable office buildings and the growing trend of tenants returning to office space to enhance productivity and culture.”

Industrial

This sector was a clear beneficiary of the COVID-19 lockdown and changing consumer behaviour, with logistics and warehousing sectors providing essential infrastructure for the digital economy and enabling distribution of products to consumers. Occupancy, rent collection, rental growth and lease activity all showed positive momentum.

Mirvac (MGR) noted resilience in industrial markets, particularly those in e-commerce. Occupancy was 99.4%.
Centuria Industrial REIT (CIP) - Occupancy remained high (96.5%) and rent collections remained strong, averaging 97% for the 6 months.
Goodman Group (GMG) – Reported high utilisation of warehouse space, occupancy at 97.8% and continued rental growth.

Retail

Retail has been one of the worst hit sectors of the commercial real estate market but the majority of companies who provided updates reported a rapid recovery in foot traffic, particularly in areas of virus containment. Some measures have returned to pre-COVID 19 levels. Suburban and local centres also outperformed those reliant on workers, tourists or outside trade in most key metrics. Leasing activity has been good, occupancy is higher and while rent collection has been low, it is improving for some groups.

Mirvac (MGR) - Leasing activity has been solid in centres where operating conditions have stabilised and deal structures are comparable to those negotiated pre-pandemic. Occupancy has been high (98.0%) but rent collection low (64%).
Stockland (SGP) - Total portfolio traffic is 90% of pre-COVID levels (97% excluding COVID-19 hit areas). Rent collection was 81%, significantly higher than 4Q20.
Vicinity Centres (VCX) - Centre visitation for the week ended 3 November, was 80% (Sep Q average was 58%) of year ago levels (96% excluding Victoria and CBD). 56% of gross rental billings across the portfolio had been collected over the quarter or 76% excluding Victorian and CBD centres.

Scentre Group (SCG) – In early November, 92% of retail stores were open and trading (including Victoria) and customer visits were 90% of the previous year levels (excluding Victoria). SCG had also reached agreement with 89% of total retailers regarding COVID arrangements. Rent collection for the quarter improved to 85% and was higher again in October at 96%.

Residential

The residential sector was significantly affected by COVID restrictions on inspections and auctions. A key positive consequence has been the adaptability of the market, including growth in digital sales tools such as guided, online project tours. This supported sales during the downturn and will assist markets going forward. Mirvac (MGR) and Stockland (SCP) both reported a strong recovery in leads, enquiries and exchanges during the September quarter, and noted that default rates remain low and in line with historical averages.

Mirvac (MGR) reported leads up 34% and exchanges up 40% over the quarter. Default rates are low at 1.9%.
Stockland (SGP) has seen elevated sales and settlements and 1Q21 was the highest quarterly net sales in over 3 years (although the rate eased from the end of Q320). This “reflects pent up demand, low interest rates, improved credit availability and government stimulus measures”. There has been a clear shift in buyer preferences towards master planned communities which are well-located, liveable and affordable with good access to open space, schools and local services.