Chief executive officer of Thinktank, Jonathan Street, has considered falling residential property prices as a “good reminder to investors and SMSF trustees that housing has its risks, and that commercial property, in terms of yield, security, and capital gain, has a place in a balanced investment strategy”.
The fact that office property remains in strong demand, especially in Sydney and Melbourne, where vacancy rates are still low, is one of the reasons for Mr Street’s positioning.
“Although there has been a slight rise in vacancy rates in Melbourne, up from 3.2 per cent to 3.3 per cent, while in Sydney they fell from 4.1 per cent to 3.7 per cent as reported by the Property Council of Australia in their July Office Market Report, the outlook remains very positive, especially for Melbourne,” he explained.
According to the CEO, the opportunity in property extends beyond the two major east coast cities with investor opportunities in areas facing economic pressures.
“Other mainland capital cities are displaying positive signs, with yields tightening in most locations even where the economic fundamentals, such as the resource-driven Perth and Brisbane, remain under some pressure,” he said.
In Mr Street’s opinion, it’s a ‘generally bullish’ outlook for office space and other commercial assets such as industrial property that investors and SMSF trustees should bear in mind when considering investment property options.
He noted that “there’s a myriad of options to invest in the commercial space, whether it be A-REITs, unlisted property trusts, property securities funds, property syndicates or mortgage funds”.
While advising individuals to always invest with caution, Mr Street said that “the fundamentals and relative yield offered by commercial remain accommodative”.
Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets.
Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.