ASX real estate shares with a dominant focus on providing office space have weathered the past week well. Surprisingly well, some might say.

COVID-19 cases continue to rise across much of Australia, with New South Wales reporting 110 new infections today.

The new wave of the pandemic has now sent more than half of Australia's population into lockdown. Including my own home state of South Australia. That hasn't impacted my own work life much, as I've long worked from a home office.

But many thousands of others across Australia have been barred from returning to their office space until further notice. We'll look at how that's impacted the price of 4 office focused ASX real estate shares below.

But first…

COVID spreading at work

As msn.com reports, almost 10% of New South Wales COVID cases in the new outbreak (15 June through to 19 July) caught the virus at their work place.

According to NSW health authorities, 123 people have contracted COVID at work:

[A] spokesperson for NSW Health said it was "expected there will be additional direct workplace transmission events reported from within the cases in the outbreak to date."

"Workplaces are a key setting where people are exposed to others outside their households, often for prolonged periods, and can transmit the virus."

And this, from the Australian Financial Review:

NSW authorities are pleading with employers to allow workers to work from home… Employers were warned new $10,000 fines for forcing people into the office would come into effect from Wednesday.

NSW Premier Gladys Berejiklian said that, "The two biggest risks to getting or transmitting COVID are workplaces or the household. We cannot stress that enough."

Now that's not all office space we're talking about here. Some of the infected workers are undoubtedly employed in other work settings deemed essential, such as grocery stores, servos and medical facilities.

But still, office focused ASX real estate shares have held up remarkably well in the face of new lockdowns.

How have these ASX real estate shares performed?

For the purposes of this article, we'll look at 4 ASX real estate shares with a strong focus on the office market. Namely:

• Centuria Office REIT (ASX: COF) is an Australia based pure play office real estate investment trust (REIT).
• Dexus Property Group (ASX: DXS) makes much of its earnings from rental income received from its directly-owned Australian property portfolio. That portfolio is weighted towards the CBD office markets along the eastern seaboard.
• Australian Unity Office Fund (ASX: AOF) invests in Australian office property and related assets.
• Victory Offices Ltd (ASX: VOL) provides serviced office packages and co-working spaces.

And as a benchmark we'll use the All Ordinaries Index (ASX: XAO).

Over the past month the All Ords is down 0.02% and the index has lost 0.64% over the past 5 trading days.

So how have our ASX real estate shares held up in comparison?

The Centuria Office REIT share price has gained 5.56% over the past month and it's down 0.80% over the past 5 days. That handily beats the All Ords over the month and is closely aligned for the 5 days.

The Dexus share price is down 4.33% over the month, but it's up 1.99% in the last 5 trading days. So below the benchmark over the month, but beating it in 5 days.

The Australian Unity Office share price trails the All Ords in both timeframes, down 7.14% over the past month and down 1.27% over the last 5 days.

Lastly, the Victory Offices share price, while down 5.56% over the last month, is up 6.25% in the past 5 days.

Foolish takeaway

Though the results are mixed, clearly these office focused ASX real estate shares haven't taken a beating from new stay at home orders sweeping Australia.

That could be because all 4 of the above ASX real estate shares are still trading well below their 21 February 2020 levels, the day the viral market meltdown commenced.

The Centuria share price remains down 24% since then, the Dexus share price is down 21%, the Australian Unity Office share price is down 22%, and the Victory Offices share price is down a painful 88%.

Perhaps after the panic selling in February and March 2020, investors are now looking beyond the renewed short and possible mid-term setbacks of rolling lockdowns to the eventual return of office work and the long-term potential value of these ASX real estate shares' underlying assets.

The post Office focused ASX real estate shares appear unfazed by new COVID wave appeared first on The Motley Fool Australia.

The Australian Unity Office Fund (ASX: AOF) share price is trading higher in afternoon trade. 

Late yesterday, the real estate investment trust (REIT) announced the $31.5 million sale of one of its Brisbane properties. The fund also announced it would be suspending its dividend reinvestment plan (DRP) for this quarter.

Shares in Australian Unity are trading at $2.27, up 2.25%. For comparison, the S&P/ASX All Ordinaries Index(ASX: XJO) is up 0.8%.

What did Australian Unity announce?

Australian Unity announced it had reached an agreement to sell 241 Adelaide Street, Brisbane. The $31.5 million sale price is equal to the asset's book value as of 31 December 2020.

Australian Unity is selling the building along with the lease to the Brisbane Club. 42 years are remaining on the lease.

Speaking on the deal, fund manager James Freeman commented:

[241 Adelaide Street] was identified as non-core to AOF and we are pleased to have entered into a conditional contract to dispose of this asset. The purchaser has also entered into arrangements with the Brisbane Club to acquire the freehold. AOF's sale is conditional upon completion of the acquisition of the freehold. We are targeting settlement prior to 30 June 2021.

In addition to the asset sale, Australian Unity also announced the suspension of its DRP for Q3 FY21.

According to the Commonwealth Bank of Australia (ASX: CBA), a DRP is an alternative method for dividend payments. Instead of the company reimbursing you its profits through cash, it will automatically invest the payment into new shares for the owner. These shares are sometimes issued at a discount. No fees are associated with the issuance of new shares.

Finally, Australian Unity confirmed it would meet its FY21 FFO guidance of 18.3 – 18.7 cents per share.

Australian Unity share price snapshot

Shares in the fund crashed at the height of the COVID-19 pandemic, reaching a low of $1.50. While they have recovered since then, the share price is still 16.23% down on this time last year.

Australian Unity has a market capitalisation of $361.6 million.

The post Australian Unity Office Fund (ASX:AOF) share price up after $31.5 million real estate deal appeared first on The Motley Fool Australia.

When hunting for a reliable income stream and capital growth, ASX commercial property shares have historically ranked highly on investors' wish lists.

As well they should.

With no end in sight for today's record low interest rates, which may edge even closer to zero when the Reserve Bank of Australia meets on 3 November, investors today are more desperate than ever to put their money to work for them.

As Ross Lees, the head of funds management for Centuria Capital, told the Motley Fool last week:

People are buying real estate because they want income. Interest rates have gone down. If you can get the right real estate with good quality tenants, I think you're really well positioned into the next couple of years.

Lees is spot on there.

But the question facing ASX investors today is, just what is the right real estate?

When COVID-19 snuck onto Australia's shores in late January, it quickly set off a series of events that drastically changed the face of commercial real estate markets. Fast forward to October and no one knows when – or even if – Australia's property markets will ever look like they did in 2019.

A stark divergence in real estate fortunes

According to Colliers International, as reported by Commercial Real Estate, the first 3 quarters of 2020 (through to 30 September) saw a 58% decline in commercial real estate transactions in Australia. And remember, those 9 months include January and February, when the coronavirus had yet to have an impact.

Retail deals over the 9 months dropped by 29% while office deals fell a dramatic 75%.

But it's not all bad news for commercial property. Industrial transactions recorded by Colliers were up 5.6% over the first 9 months of 2019.

While the viral shift of people working and shopping from home has dragged on the office and retail markets, it's seen a big boost for e-commerce. And in turn ushered in growing in demand for warehouse and logistics facilities to support that.

According to Ross Lees:

We've seen a huge acceleration in e-commerce. The industrial sector already had a big tailwind behind it, and that's just really pushed it along. In the last 2 months, we've been the largest acquirer of industrial real estate in Australia…

The opportunity in industrial is the revolution in e-commerce, how companies respond to it, what they do in their supply chains and how that can drive industrial demand.

Colliers believes the 5.6% growth in industrial deals would have been significantly higher if not for a shortage of prime assets for sale. The firm estimates there's some $26 billion of capital, primarily from institutional investors, interested in the industrial sector.

Gavin Bishop, head of industrial capital markets at Colliers International, says:

Given that just $3.57 billion has traded so far in 2020 [in industrial transactions], it highlights the significant mismatch between supply and demand and the significant volume of unsatisfied capital looking to be placed. As a result of this, we expect that additional assets will be brought to market in 2021 as groups look to capitalise on the continued strength of the industrial and logistics market.

Will ASX office shares bounce back?

It's far too early to sound the death knell for the office market.

While the coronavirus has hyper-accelerated the pace of changes that were already taking place when it comes to CBD office space, many workers – and their bosses – are eager to see a return to shared work spaces.

Cushman & Wakefield's NSW managing director of commercial real estate, Simon Fenn remains bullish on the office market outlook.

As Commercial Real Estate notes, Fenn expects "office sales volumes to increase in the final quarter of the year and to be higher again in the first half of 2021 – provided the COVID-19 virus is contained".

Containing the virus is, of course, the big and highly unknown caveat here.

Nonetheless, Ross Lees also remains optimistic on the future of the office market, though he believes it will likely be less centralised with solid public transport connections and close to amenities. And the buildings themselves will likely need some amending.

As Ross states:

We've focused on making sure that the buildings are in a situation where tenants feel comfortable returning to work. Priorities have been making safe work plans, places where people want to come.

How have these ASX office and industrial shares performed?

We'll tie this off with a quick look at the performance of some leading industrial and office funds.

First up for the office sector is Centuria's real estate investment trust, the Centuria Office REIT (ASX: COF). At the current share price, the REIT pays an annual dividend yield of 8.3%. Year-to-date the share price is down 29%.

Next up is the Australian Unity Office Fund (ASX: AOF). The fund pays an annual dividend yield of 6.2%. Year-to-date the share price is down 24% since 2 January.

Turning to the industrial sector, the Centuria Industrial REIT (ASX: CIP) pays an annual dividend yield of 5.6%. The share price is down 2.5% in 2020.

Then there's the APN Industrial REIT (ASX: ADI). It pays an annual dividend yield of 4.5%. Year-to-date the share price is 8.6%.

For some comparison, the S&P/ASX 200 Index (ASX: XJO) is down 7.0% in 2020.

With the share prices of the office funds having fallen further, their current yields are certainly more attractive.

The question every investor needs to ask themselves before investing for income though, is what's the long-term outlook for capital gains?

The post Looking to invest in ASX real estate shares? Read this first appeared first on The Motley Fool Australia.