Commercial property is an asset class currently providing good investment opportunities for SMSFs, but it is still largely being overlooked by fund trustees, according to Australian Unity Real Estate Investment.
When considering property as an asset class, most investors automatically thought of residential property, but with that sector of the market at risk of overheating, it might not be the right time to invest in the area, Australian Unity Real Estate Investment head of portfolio management Ryan Banting said.
“Trustees who wish to include property exposure in their investment portfolios would do well to consider commercial property,” Banting said.
“Investors may believe that commercial property isn’t suitable for an SMSF because of the size of the investment required, the possible lack of liquidity and the difficulties in managing a commercial property, as opposed to a residential property.”
However, such concerns could be overcome by taking advantage of pooled investment vehicles, such as listed and unlisted property trusts, he said.
“These trusts may be an option for smaller investors looking to diversify their SMSF portfolio into the commercial property space,” he said.
“Both are managed by professional fund managers who invest and manage a portfolio of properties using the pooled capital.
“Other benefits of investing in commercial property through a managed fund include diversity, regular valuations, smaller capital requirement for buy-in, potentially greater liquidity through regular withdrawal facilities and a stable income from a diversified tenancy base.”
Unlisted non-residential properties in Australia had achieved investment yields of about 7 per cent in the past two years, which provided stable and regular returns for investors at a time when other asset classes had faced headwinds, such as falling interest rates and weakness in the share market, he said.
“Unlike listed property funds, unlisted funds are not subject to the share market volatility that listed funds have experienced in recent years, exhibiting performance in line with the underlining investment properties,” he said.
Australian Unity Investments head of healthcare and retirement property Chris Smith said the healthcare property sector was a good example of that.
“The healthcare property sector has been less volatile than other commercial property sectors over the past few years and has outperformed all property on a one, three and five-year basis, driven primarily by strong income returns,” Smith said.
“Healthcare properties are different because they are relatively scarce, operate in a regulated industry and are typically leased to large, stable and well-resourced operators.
“The ageing Australian population and increasing need for healthcare services ensures high occupancy levels and contributes to higher income yields.”
