After recent declines in a number of property trusts, investors considering a future allocation to the sector are likely to favour simple funds offering modest yields, according to the head of a boutique property manager.
“What happened over the last three or four years is they [property funds] have all chased growth and funds under management. To do this they have had to… go offshore [and] do developments, so they became much higher risk plays than traditional property trusts,” GDI Property Group executive chair Tony Veale said.
“We think investors have probably woken up to that and… are going to come back to looking for well-let, steady income, paying an 8 to 9 per cent distribution with 2 or 3 per cent capital growth,” he said.
The GDI Property Group specialises in commercial office investments, a sector where solid domestic opportunities currently exist, according to Veale.
Specifically, Western Australia and South Australia are the two states offering up the most attractive investments.
“WA has the lowest office vacancy of any city in the world, under 0.5 per cent, and the new development that was on the drawing board has not started and will not be starting,” Veale said.
“Also in those markets there is still a lot of repositioning taking place. In Adelaide for example, some companies are still growing and have committed to contracts over the last 12 months and need space.”
