Morningstar initiates coverage on Growthpoint Properties Australia (ASX: GOZ). GOZ is an internally managed Australian REIT, with commercial property investments split circa 65/35 between Australian office and industrial assets. Its assets are typically smaller, but it has maintained high occupancy at its sites. The Group has three operating segments, namely Industrial property investments, Office property investments and Funds management.

Growthpoint Properties Australia was born out of the debt-stricken Orchard Industrial Property Fund following the global financial crisis. Starting as a pure-play industrial property trust, Growthpoint quickly expanded into the office sector.

Most of Growthpoint’s offices are in city fringes, placed well for population growth. However, investors who believe in Growthpoint’s story will have to be pateient to see this materialise.

While some sites have locked in long leases with government or reputable tenants, we believe their city fringe locations are a major drawback. As office tenants seek more premium, better-located buildings, we expect Growthpoint’s office occupancy to remain below the prepandemic average of 97% midcycle. Lease incentives offered to tenants are likely to persist at a higher level compared with the historical average.

However, as mentioned, the bull case for Growthpoint is that these buildings will attract tenants is population growth is to continue, and cities push further into the edges.

We assume a slower recovery for Growthpoint’s office buildings, compared with their CBD counterparts. As employees attend the office less frequently and companies downsize their floor space, the flight to quality continues. More tenants can now afford to relocate to higher-grade offices in the CBDs, while enjoying an upgrade in location and amenities.

Growthpoint’s office locations are inherently less appealing compared with CBD buildings. Therefore, we don’t expect the office portfolio to return to prepandemic occupancy levels over the next decade. We expect office occupancy to gradually pick up to mid-90% in midcycle, below the prepandemic average of 97%. Lease incentives are likely to stay elevated as Growthpoint uses them to attract and retain tenants.

Growthpoint also has a fledgling funds management platform. As of June 2025, Growthpoint manages a dozen or so unlisted funds for institutional investors and high-net-worth syndicates.

The South African-listed real estate trust, Growthpoint Properties, owns about two-thirds of Growthpoint Properties Australia’s securities. The largest shareholder could exercise material influence over Growthpoint Properties Australia’s decision-making. As of June 30, 2025, five of the nine directors on the board are independent, and three are associated with the major shareholder. We think this is a fair ratio.

We believe that GOZ is modestly undervalued relative to our Fair Value Estimate (FVE). It currently sits at 7% undervalued on the 15th of September 2025. We don’t believe that the company has earned a moat due to the subprime locations of most of their property portfolio, the large number of alternative sites, the speed at which rivals can establish new facilities, and the ease for tenants to switch locations.

Bulls say

Some of Growthpoint’s assets are in city fringe locations that could see solid population growth. These sites have the potential to be redeveloped for higher and better uses, increasing asset values.

There is room for growth in the funds management platform. As we emerge from the commercial property downturn post covid, investors are returning to the property sector.

Growthpoint’s industrial portfolio is under-rented at the moment, which could see further rental uplifts in market reviews.

Bears say

Growthpoint’s city fringe offices could be hard-hit amidst a structural shift in office attendance. Growthpoint is likely to have to trim rent growth or offer higher incentives to attract tenants.

Property funds management is competitive. As a latecomer, Growthpoint’s platform faces more intense competition from well-established brands.

Growthpoint’s office valuations values could compress further before stabilising, given their secondary locations.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural or competitive advantage that allows a firm to generate attractive long-term profits. Companies with no moat are considered to lack long-term competitive advantages. Companies with a narrow moat are those we believe are more likely than not to sustain attractive profits on average for at least a decade. For wide-moat companies, we have high confidence that attractive profits will persist for 10 years and are likely for at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.