Industrial property a good alternative to term deposits
The Reserve Bank of Australia's move to slash interest rates will spread to term deposits and encourage advisers to search for alternatives, said Richard Stacker, Charter Hall Direct Property chief executive.
Stacker said the cut to interest rates will make term deposits look less attractive to investors who will need other options to fill the gap.
He said there was a need for post-GFC (global financial crisis) adviser education on the benefits of property - in particular, industrial property - which had performed better than the overall Australian unlisted property market and presented a good alternative to term deposits.
Stacker said property still fulfilled that need for diversification and had performed well compared to other sectors with long-term average total returns for Australian commercial property sitting at just over 10 per cent on the IPD Index.
He said 70 to 80 per cent of total return came from yield with the remaining portion coming from increases in underlying leases.
Chris Freeman, research manager for Charter Hall, said industrial property's long-term fixed lease structure and high income yield presented an attractive offer over bonds for investors.
Stacker said syndicate property funds that had performed well since the GFC were "market specific and very asset specific in terms of quality and the story around (them)".
Funds that closed because of the GFC, Stacker said, had been open ended and provided daily liquidity to investors.
"The ones that have a future have reopened with limited liquidity facilities, and review that so investors know what their term will be," he said.
Stacker said Charter Hall's Direct Industrial Property Fund, launched two years ago, is an example of a successful industrial property fund in action, providing an 8 per cent income return with a weighted average lease expiry of 14 years.
The fund has grown from a $30 million initial asset to almost $160 million, Stacker said, and will close at the end of the financial year.
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