Amazon threatening property investments, SMSFs warned
SMSFs with allocations to commercial property in the fund have been warned that the expansion of retail giant Amazon and ecommerce generally could impact the value of commercial property investments in the retail sector.
Speaking to SMSF Adviser, GEM Capital adviser Mark Draper explained that with interest rates likely to rise, and the expansion of ecommerce, the bricks and mortar retailers are coming under enormous pressure, and their rents are as well.
A lot of the trusts and funds that invest in commercial properties he said are no longer receiving the tailwind of falling interest rates, so the next time they refinance their properties it’s likely to to be at a higher rates of interest, which may impact returns.
Where SMSFs invest in a managed fund, index or ETF, Mr Draper said they need to carefully consider their exposure to the retail commercial property sector.
“You've got one of the biggest retailers in the world, Amazon, which is a 250 pound gorilla coming in, so is retail property really sustainable in its current form?” cautions Mr Draper.
“I'm not suggesting the death of retail property but is it sustainable at current prices and current rents, I think that's the question that SMSFs have to ask themselves.”
Henderson Maxwell general manager Tony Davison agreed that commercial property funds in the retail sector could be set to face some headwinds.
“It's clear that there are less people going to shopping malls, especially the really small ones. So strip retail, in particular, we don't like,” he says.
“We also don’t like retail commercial property overseas, mainly because of Amazon; it’s not specifically Amazon but e-commerce in general.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.