Consistent rental returns on direct commercial property, but capital gains fluctuate: AMP

Prime CBD non-residential property such as offices and shopping centres have delivered rental yields of between 5% and 10% to investors consistently every year going back to 1986, according to AMP Capital.

However, as the graph below shows, capital gains tend to fluctuate.

The graph highlights the income and capital gains returns of the benchmark IPD Australian All Property Index since 1986.

The index tracks 1,629 direct property investments worth $136 billion.

According to Damian Fitzpatrick, fund manager for property at AMP Capital, offices and shopping centres are a key part of a diversified portfolio because they can provide stable, reliable income streams.

“These investments can also provide a hedge against inflation due to regular rent reviews that are linked to the consumer price index (CPI).

“However there are still underlying risks in the sector, therefore portfolio diversification and experience in managing these assets are critical,” he says.