The Zenith Fund Awards recognises and encourages excellence in funds management across all asset classes and disciplines. Each of the awards is based on long-term factors derived from Zenith’s extensive research and due diligence of fund managers, including quantitative aspects of the funds’ longer-term returns to investors, as well as organisational and investment team strength, investment philosophy, portfolio construction, security valuation and selection, risk management, and fees.

The SGH LaSalle Concentrated Global Property Fund seeks to provide total return through long-term capital appreciation and current income by investing primarily in equity and equity-related securities issued by Australian and international property entities. US based portfolio manager, Matthew Sgrizzi leads the team that managed the fund.

SG Hiscock & Company is the distributor of the fund in the Australian market. SG Hiscock founder Stephen Hiscock said the award is a testament to the LaSalle team, and its rigorous investment process and continuous commitment to generate strong returns for clients.

“Winning the Zenith Fund Manager Awards is recognition of the tremendous work led by Matthew and his team — their dedication, strong fundamentals, and consistent investment discipline have been proven over many years.

“They continue to identify opportunities with compelling valuations and capitalise on diverse areas of the global property markets. LaSalle’s disciplined approach has enabled the fund to deliver strong returns since its inception,” said Mr Hiscock.

Over a 5-year period, the fund has a net annualised return of 10.75 per cent, compared to the FTSE EPRA/NAREIT Developed Index, at 5.20 per cent. It also has a Highly Recommended rating from Zenith, a Recommended rating from Lonsec, and a Recommended rating from Genium.

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Matthew Sgrizzi

As investors position their portfolios for greater geopolitical and economic uncertainty, real estate investment trusts (REITs) are well positioned to potentially outperform alternatives, underpinned by undemanding valuations and solid fundamentals, while some REITs may even benefit from the impact of US trade tariffs and inflation in construction costs, according to Matthew Sgrizzi, CIO and portfolio manager at LaSalle Investment Management Securities.

According to Sgrizzi, global real estate is well positioned to weather the current environment for three key reasons. First, real estate possesses inherent structural characteristics that provide resilience. Values are underpinned by defensive and durable cash flows, often secured by long commercial leases.

“In addition, REITs may benefit from any rise in construction costs. US tariffs are likely to drive up the cost of construction in any country that raises tariffs on key construction inputs, and that could push up the rents required to justify new development in numerous locations where tariffs have an impact, which could favour REITs with existing assets.

“Second, these structural factors are reinforced by mostly healthy conditions in global real estate markets. Falling supply levels, a repricing process, and conservative overall leverage levels in most segments of global REITs could all favour the performance of global real estate in the months and years to come, despite growing uncertainties around global trade and geopolitical uncertainties arising from ongoing wars.

“Third, real estate valuations appear undemanding and less stretched than those of several other major asset classes, especially large-cap equities. Real estate has underperformed general equities in recent years, cumulatively underperforming by around 30 per cent since the end of 2021. As the environment has shifted, it is possible that real estate’s underperformance could reverse over the short to medium term and REITs could potentially outperform equities which are facing increased volatility given the new government in the US and rising geopolitical tension,” he said.

According to Sgrizzi sectors like industrial and logistics real estate are likely most directly affected by US trade tariffs, but that the impact may be short-lived.

“Thankfully, the long-term context of logistics real estate is one of positive structural growth, which means this impact takes the form of a downgrading, not a devastation, of the sector’s prospects. Moreover, in the long run, global economic fragmentation could lead to greater supply chain redundancy and therefore increased aggregate space demand,” he said.

Other examples of real estate sectors facing impacts directly tied to tariffs include US power centres exposed to discretionary expenditure on largely imported goods. “There are also potential direct impacts on real estate from other Trump policies beyond tariffs, for example around reputational issues that seem to be suppressing inbound and outbound tourism, as well as changes to scientific research funding,” said Sgrizzi.

“Sectors with a high degree of economic sensitivity, such as hotels could also be impacted, and are likely to see an outsized negative hit to demand in the event of an economic downturn.  Meanwhile, economic impacts should be limited for sectors with low fundamental sensitivity to GDP growth, such as medical offices, cell towers and data centres.

Relative impacts are potentially the reverse for sectors with a high degree of interest rate sensitivity said Sgrizzi.

“An economic downturn usually leads to lower interest rates – although recent market movements suggest that is not necessarily a given. The impact of lower rates on the more interest-rate sensitive parts of the real estate market could enable them to absorb some or even all the effect of softer demand. These property types are generally those with longer leases, such as the mainstream commercial sectors,” he said.

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Matthew Sgrizzi

Matthew Sgrizzi, chief investment officer and portfolio manager at LaSalle Investment Management Securities, expects a strong performance from real estate investment trusts (REITs) in 2025, with the potential for a “golden era” driven strong demand for commercial property against short supply coupled with further easing in inflation and interest rates.

According to Matthew Sgrizzi, given strong financial positions, access to capital markets and increasing investor confidence, REITs are positioned to benefit from an improving environment that could lead to outperformance.

“We believe that the REIT market is poised for a significant upturn, potentially entering a new ‘golden era’ of investment,” said Mr Sgrizzi.

“The convergence of a number of factors, including a period of dislocation in bank lending, negative market sentiment, REIT underperformance, and the potential for an easing of financial conditions, mirrors the circumstances that have preceded previous periods of exceptional growth in the REIT market,” he said.

“Real estate fundamentals are broadly healthy; they are super strong in the data centre and healthcare sectors, and we have an outlook for low supply being a tailwind for core REIT sectors of office, retail industrial and residential in 2025. That low supply should support the outlook for many real estate sectors around the world this year,” he said.

“Even concerns gripping the office sector are fading. We now see high-quality offices are in high demand and short supply in many markets around the world; we are seeing rents increase in some locations for office space,” said Mr Sgrizzi.

“We’ve also seen real estate lending is picking up and real estate capital formation is improving, along with opportunities for investors.”

Mr Sgrizzi says overhyped positivity on stock markets and negativity on real estate has historically set the stage for REIT investors to enjoy multi-year periods of improvement and outperformance. He is reminding investors to add back real estate to portfolios to enjoy strong expected returns which compare well to global equities, if not better.

Mr Sgrizzi’s base case projection for REITs is for total returns of in the high single digits per annum over the next three years, with close to half of that return from income. If financial conditions ease further, those return expectations could he higher. Over the past 25 years, REITs have produced total returns of 8% per annum, with around half that return coming from income.

“If financial conditions ease further, such as by 50 basis points or 100 basis points, return expectations could increase to mid- to high-double digits, respectively, potentially setting the stage for the next ‘golden era’ in REITs,” he said.

Importantly too, if interest rates fall, so will borrowing costs for REITs. The majority of REIT borrowing is from the unsecured loan market, at interest rates that are almost 100 basis points lower than a traditional mortgage, currently. Lower interest rates would reduce these borrowing costs further.

In terms of sector and geographic opportunities, Mr Sgrizzi sees strong growth in data centres and healthcare REITs and he favours Europe and the UK given subdued prices.

“Today’s REIT sector is so broad and diverse. We are seeing some great opportunities in sectors that took a big hit in the fourth quarter, particularly interest rate sensitive sectors that have higher longer term growth potential or are more yield orientated, such as cell towers, and those sectors could do quite well this year, given they have been sold down,” he said.

“We see the same thing with REITs in Europe and the UK, which have taken a hit in the last couple of months with higher interest rates and in reaction to US policy changes; UK REITs are about as cheap compared to US REITS as the group has ever been and there is also less upside pressure on interest rates in Europe compared to the US.

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Matthew Sgrizzi

Real estate investment trusts (REITs) could be on the cusp of a new “golden era” in 2025, despite recent challenges in the sector, according to Matthew Sgrizzi, CIO and portfolio manager at LaSalle Investment Management Securities.

Mr Sgrizzi and his team at LaSalle have identified four common elements that have preceded strong performance by REITs: a dislocation of bank lending to real estate; broad-based negative sentiment around real estate; underperformance versus broader equities; and an easing or reset of financial conditions.

“Pattern recognition is a useful approach that can help in predicting regime shifts in market conditions. Our study of historical periods of listed REIT under- and outperformance identifies a clear pattern. Namely, there are four common factors that have driven REIT strength after a period of challenges,” said Mr Sgrizzi.

“The current environment resembles the set up for these historical golden eras, suggesting REITs may be on the cusp of its next golden era of investment. Many of the factors supporting the REIT market’s upbeat prospects are also positives for real estate as a whole. For example, an easing in financial conditions has historically been a driver of strong forward REIT returns, as well as those for private equity real estate.”

According to Mr Sgrizzi, the past few years have seen a significant retrenchment in bank lending to real estate. According to the US Senior Loan Officer Survey, the net balance between demand for loans and banks’ willingness to lend points to the widest undersupply of credit in the past ten years, except for during the depths of COVID-19.

“This situation presents an opportunity for REITs, given their strong financial positions. Global REITs entered the recent tightening cycle with their lowest leverage levels on record, and nearly 90 per cent of their debt on fixed rates and an average remaining term of seven years,” he said.

In terms of REIT underperformance relative to broader equities, this has reached typical peak historical levels before reversal. “Periods of underperformance have historically tended to reverse and this instance is no different with the performance gap already narrowing,” Mr Sgrizzi said.

In addition, a global monetary easing cycle is now well underway, which historically bodes well for REITs.

“Real estate is a capital-intensive business that is sensitive to changes in financial conditions, an observation that holds true for both directions of interest rate change. The downside of this was evident in 2022 and 2023, but the upside is likely coming into play. A global monetary easing cycle is now underway, with several central banks cutting rates. Historically, REITs perform well well in periods leading up to and following a central bank easing cycle.”

Over the past 25 years, REITs have produced total returns of 8 to 9 per cent per annum. Looking ahead, Mr Sgrizzi projects that his base case underwriting for the next three years is for the REIT market to produce total returns in line with those historical averages, with roughly four percentage points of that coming from income.

“If financial conditions were to ease further, these return expectations could increase to the mid- to high teens range per annum, which aligns with previous ‘golden era’ REIT performance,” he said.

“Investors are advised to consider REITs as part of a diversified portfolio, particularly given the sector’s current valuations and potential for recovery in the evolving economic landscape. While history does not repeat itself, it does often rhyme, and we believe we are on the cusp of the next ‘golden’ era,” he said.

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