Commercial property will appeal to risk-averse investors in 2012: Centuria

Risk will be the buzzword in 2012, with investors seeking stable investments like bonds and commercial property, according to diversified fund manager Centuria.

Centuria believes the current volatile environment will continue into 2012 and says it could take up to two years before any kind of “normality” returns.

In this risk-averse environment, investors in search of low-risk, low-volatility investments will be drawn to commercial property as part of reweighting and re-diversifying their portfolios, the company says.

“Investors will move towards a ‘back to basics’ approach that sees a return to favour of the traditional one-third shares, one-third property and one-third cash allocations, at least as a starting point,” the company forecasts.

According to Centuria further reductions in interest rates in early in 2012 would further boost the appeal of commercial property.

And it believes that ongoing market volatility will offer further “attractively priced investment property opportunities” that can be packaged to offer investors steady income streams.

“In the past 10 or more years, many investors have been focused on returns, returns, returns. In 2012, the risk aversion that’s been growing will become even more prevalent, as investors realise that market volatility is here to stay. Risk will be the new “R” word,” says John McBain, chief executive of Centuria Capital.

“Instead of just sitting in cash as they have been, investors will realise that it’s time to make some considered decisions and return to a more defensive and balanced asset allocation.

“Investors should be looking to more conservative investment strategies such as equal allocations between shares, property and cash,” says McBain. 

For investors balancing their asset allocations more evenly, the property and bond markets will benefit, particularly as falling interest rates steer them away from cash and make direct property and bonds a more attractive long-term investment return proposition, he says.

During 2011, Centuria’s portfolio comprising office, industrial and homemaker centres grew beyond $1 billion worth of funds under management following the purchase in April of a newly constructed five-level commercial building at 8 Australia Avenue, Sydney Olympic Park for $30.15 million. 

The building, completed in 2010, is 100% leased with tenants including Fujitsu, The Sydney Olympic Park Authority and Watpac.