ASX-listed property owners are on high alert for market turbulence after experiencing a 15.4 per cent drop in value due to economic headwinds and a mixed outlook from inflationary issues.

Analysts say office assets will experience pressure from flexible working practices, prompting tenants to reduce their footprint to save on rental expenses. Concerns around discretionary spending are creeping into the retail sector as interest rates rise, while industrial demand is pushing rents sky-high.

Investors are also cautious with sales volumes falling away in the second half of calendar 2022.

However, in the most recent round of quarterly updates, the Australia real estate investment trust (A-REIT) managers said they are cautiously optimistic conditions will show improvement in the coming year as the economy stabilises.

Having endured the impact of the global pandemic and now rising interest rates and inflation, A-REITs have underperformed the S&P/ASX 200 Index by 5.1 per cent, according to the latest BDO Australia A-REIT survey.

The survey, in its 28th year, found that all market sectors, including industrial, retail, office, and diversified, delivered negative returns for the 2022 financial year, being a reversal of the pandemic-hit 2021 year’s result when all sectors registered a positive 7.1 per cent outperformance of the index.

The BDO annual survey ranks the S&P/ASX 200 A-REIT Index trusts based on key financial and investment indicators in the 12 months to 30 June each year

BDO Australia’s A-REIT specialist and corporate finance partner, Sebastian Stevens, said the outlook for A-REITs remained strong, with results over the past year mirroring public sentiment as the RBA began tightening monetary policy.

“A-REITs enjoyed a recovery high last year, but broader macroeconomic impacts, local impacts, and negative market sentiment have contributed to a perfect storm that has led to this downturn,” Stevens said.