Retirees look to commercial property for high yield investments

Life expectancy for both Australian men and women is over 80 years old now, and with Baby Boomers reaching their 50s and 60s, older Aussies are having to rethink the state of their financial security.

Low interest rates mean that savings alone may no longer be enough to fund a comfortable retirement and in order to maintain the standard of living they’ve grown accustomed to, new retirees are turning to higher yielding investments, such as unlisted property funds, which allow them to invest in commercial real estate.

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Jason Huljich, CEO for Unlisted Property Funds, Centuria said, “With the lowering of the government cash rate, it is near impossible to live on savings alone and when comparing investments many are leaning towards unlisted property funds.”

Although Aussies have traditionally prefered the more secure investment of residential property combined with negative gearing, unlisted property funds are increasingly presenting opportunities for “attractive monthly income, tax breaks and also potential for capital gains.”

A report by BIS Shrapnel recently found that the office market in Sydney has begun to grow, with 2018 vacancy rates expected to drop to 4% across the city and stay low for the following few years. The report predicted that new office space needs across the city wouldn’t be met until around 2020, which means investor profits could grow along with rental rates.

Sydney suburbs such as Chatswood were expected to see commercial rent rates rise by over 38% in the next 6 years.

In regards to the properties Aussies looking at commercial real estate should focus on, Huljich said “investors should explore how certain suburbs may increase in demand due to new transport links and other infrastructure, the lack of development sites, increasing amenity and how the office workforce is becoming decentralised from CBD’s due to lower rental costs and easier commutes.”

“It’s equally important to properly assess the property’s tenants to help gauge the strength of an investment,” he added. “Tenants such as government organisations and ASX listed companies are preferable to smaller private companies and these larger tenants tend to have longer lease periods.”

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