Commercial Property Unexpected Winner

The commercial property market could be the unexpected winner out of the Federal Government’s changes to capital gains tax and negative gearing.

The changes mean investors will begin looking at assets with higher yields, which commercial properties generally have.

JLL sales and investments director Jack O’Leary says the changes to negative gearing and capital gains tax could trigger a rethink for investors who typically favoured residential real estate.

Australia’s largest commercial real estate funds manager, Charter Hall, is also predicting an investor move toward commercial property.

Chief executive David Harrison says that with investing in existing homes now less attractive, some investors will move toward higher-yielding commercial assets.

“This is due to lower income returns in residential property and reduced tax benefits from negative gearing,” he says.

Harrison expects growing demand for higher-yielding retail, industrial, social infrastructure and office assets, particularly when secured on long lease contracts.

Commercial property assets remain exempt from negative gearing changes but not changes to capital gains tax.