Retirement planning: The unlisted property fund option

With life expectancy now over 80 for both men and women, the way people are planning for retirement is changing, especially for the first wave of Baby Boomers now aged between 50 and 69 years old.

Financial security is the key factor in decisions about when people can retire, particularly for being able to maintain the same lifestyle before retirement.

With low interest rates, it is now almost impossible to live from savings alone, which is leading to a shift in how people are thinking about investments, with more seeking high yielding options.

Jason Huljich, chief executive officer 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 -- which over time have managed to outperform government bonds, the ASX and Australian Real Estate Investment Trusts.”

Traditionally, Australians have sought safety in bricks and mortar in residential property using negative gearing to grow their investment portfolio. However, commercial real estate is becoming more accessible as an investment for all Australians through unlisted property funds, which can provide attractive monthly income, tax breaks and also potential for capital gains.

“When investing in commercial real estate, 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 CBDs due to lower rental costs and easier commutes,” Huljich said.

“It’s equally important to properly assess the property’s tenants to help gauge the strength of an investment. 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.”

A recent report by BIS Shrapnel has found that the metropolitan office market in Sydney has begun a strong upward swing and by 2018 the vacancy rate is forecast to fall to four percent across the city and stay low until at least the end of the decade. The same report expects that it will take at least until 2020 for new office space to meet demand which is likely to raise rental rates and will, in turn fuel investor expectation of capital growth and see significant price escalations from now until the anticipated cycle peak in 2021.

“The BIS Shrapnel report forecast that suburbs such as Chatswood in Sydney will see commercial rents rise by over 38 percent in the next six years and buildings such as The Zenith, which is part of a new Centuria unlisted property fund, are likely to benefit significantly from this forecast over the next decade.”

The Zenith, a property strategically located in the geographic heart of Sydney’s dynamic economic hub of Chatswood is being acquired by Centuria Property Funds and is available for private investment until 20 July 2016.

This article reflects the views of unlisted Centuria Property Funds and its CEO Jason Huljich. Centuria Property Funds manages $1.2 billion across 13 unlisted property funds.