The mum and dad segment of the investment market are increasingly looking at commercial property

The so-called mums and dads segment of the property investment market which traditionally put their money into residential are increasingly understanding the benefit of commercial assets.

CBRE researcher Ally McDade and agent Dillon Murphy say the mums and dads segment of the commercial proeprty market is becoming increasingly important. (AAP Image/Richard Waugh)

MUM and dad investors are increasingly turning away from residential real estate and are prepared to invest their hard-earned money in commercial property.

According to CBRE research, the Greater Brisbane retail, industrial and childcare markets are experiencing strong demand in the sub-$3 million price point.

This sector appeals to smaller investors, especially self-managed super funds, and has seen consistent year-on-year growth from 2012 to 2016, with final 2017 volumes on track to equal or surpass last year’s activity levels.

Conversely, the residential apartment market is experiencing declining sales in a market awash with investment stock.

CBRE Research associate director Ally McDade said the mum and dad market was influenced by the cheap cost of debt and chase for yield, as softening fundamentals underpinned the residential apartment market.

“While population growth has edged higher in recent quarters, it remains below historic averages,” she said.

“This, coupled with the completions surge, is starting to increase residential vacancy and weaken returns. On the ground, feedback suggests these trends will be amplified in coming quarters.”

CBRE senior manager, industrial and logistics, Dillon Murphy said agents were seeing more private investors looking at commercial property.

“CBRE’s inquiry tracker shows there is an increasing list of potential purchasers looking to obtain an asset in this class,” he said. “Data shows approximately half of current inquiry is driven by private investors seeking commercial investments up to $4 million.”

Mr Murphy said in the industrial sector, strengthening demand from smaller investors had seen indicative yields across greater Brisbane tighten 180 basis points over the past five years and 110 basis points over the past three years.

“Although yields continue to tighten, the yield spread to residential property remains wide, and private property investors are realising there is still more value in commercial property compared to the residential sector,” he said.

“With access to data on the internet, novice commercial investors have the ability to enter the purchasing process well prepared.

“Entry price for commercial investments can even be as little as $200,000 for a strata title unit. This is an accessible price point for investors using home equity or SMSFs.”