What makes a good commercial property investment?

Some factors to consider when investing in listed and unlisted property funds include, but are not limited to:

  1. stock market volatility, the ability to exit the investment (liquidity),
  2. the gearing (level of borrowings) of the properties in the fund and the costs of servicing that debt (interest costs); and
  3. understanding the individual characteristics of the properties held by the fund
    1. tenant demand and tenant profile
    2. property valuation metrics
    3. cash flow sustainability
    4. nature of lease agreements
    5. weighted average lease expiry dates
    6. yield – how much rent is being produced
    7. age and state of the building(s), outgoings and location

If you are looking to invest in a commercial property through a fund manager, then you need to assure yourself that they have the experience appropriate for optimising your investment. Before investing, here are some important questions to ask about a fund manager:

  • How have they performed historically as a manager?*
  • What does their current investment portfolio look like (what are their core investment competencies)?
  • Does the manager outsource the management of the property portfolio, or do they internally manage it (do they have direct access to the tenants and properties)?
  • Do they have in place a framework for strong management of the asset going forward? This may include having in-house asset managers to maintain the property to the highest standard, so the value is also maintained, but also facilities managers across the property so that tenant sentiment is a priority.

Over 20 years of experience has given Centuria an understanding of the commercial property market cycle, the geographical levers, and demand for the particular types of commercial real estate. This helps with the acquisition and sale of commercial properties in our portfolio.

* Past performance is not a reliable indicator of future performance

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