Off-shore investors may have seen and reaped the benefits of industrial estate investment, but Aussie retail investors are also starting to smell the coffee.
The head of direct property at Charter Hall, Steven Bennett, told Nest Egg that commercial property has historically been popular with large institutional investors like offshore pension funds, superannuation funds and future funds.
Investing in industrial real estate however is a growing “boom area” and it’s one offshore investors have picked up on first. However, Aussie investors are catching up.
“Offshore investors have probably picked up on this trend a little bit quicker than some of the Australian investors, and that's because they're further down the field of e-commerce,” Mr Bennett explained.
“When you think about e-commerce, well, what do you need? Maybe less bricks and mortar, but you need more warehousing. You need more depots to ship the goods.”
He said this is the beginning of a long-term trend in Australia, which is already experiencing high levels of demand in Sydney, Melbourne and Brisbane for industrial assets.
“But that trend will happen across Australia,” Mr Bennett added.
Speaking about commercial property more broadly, he noted that Australian investors haven’t traditionally shown much interest in the space. However, that is also changing due to the appeal of higher income.
Mr Bennett explained, “You have to consider the income. If you're pulling out 3 per cent income on a residential property after all your costs to maintain it, your agent's fees, it's probably not a bad result in a market like Sydney, for example.
“Commercial property, after all costs for a very high quality asset, whether it's in office or industrial, should give you 6-7 per cent, and that's very attractive.”
However, he urged investors to remember that the landscapes are different.
“Commercial property is a good way to get some of the benefits of property exposure, but not have it so correlated to what's happening in the residential market because commercial property does not move in the same way that the residential markets do,” Mr Bennett said.
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