Commercial properties include office buildings, shopping centres, hotels and warehouses.
They account for 8 per cent of the assets of Australian super funds.
If their values drop (and they are falling) it will affect all of us, especially those about to retire or already retired.
Until COVID-19, commercial properties were widely regarded as safe investments. They offered both reliable income streams and capital gains as population growth increased the value of scarce real estate.
With the return on government bonds falling below 1 per cent they ought to be becoming more attractive, but offices are empty, their future uncertain, high end shopping centres are receiving less traffic, and hotels have entire floors unused.
For super funds with 8 per cent of their assets in commercial property, a decline of 25 per cent in values knocks 2 per cent off their assets — $54 billion across the industry as a whole.
In the only other big downturn since the advent of Australia’s superannuation system, the global financial crisis, commercial property offered the funds stability while shares were volatile.
Not so this time. The value of the commercial property is diving along with the stock market with just as uncertain a future.
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