When it comes to investing in commercial real estate in Australia, most people believe they have to have upward of $1 million before they can purchase a property. The sheer size of capital outlay can prove prohibitive, but even if an investor can afford the outlay – it might be too hard to manage or provide too much concentration risk in one investment. This is where listed and unlisted real estate investments can be simpler and easier than direct property investment.

Listed and unlisted real estate investment trusts are merely a mechanism to pool investors, so that they might have a beneficial interest in a portion of a commercial property. Investors get a proportionate return of income, potential capital gain, and tax effectiveness depending on their situation. They have a further advantage over direct investing, as all the property management, banking arrangements, and accounting are handled by professional fund managers, and usually on more favourable terms. Trusts also quarantine risk, meaning there is no recourse to investors if there was a default on debt arrangements. 

While both investment types offer opportunities to grow your wealth, they come with different features, benefits, and risks. Unlisted investments can be further divided into open end (taking investment daily) or closed end funds like the Natgen Investment Trusts. Features can be summarised as below; 

Equity and currency markets have had a brutal week. Major equity indices around the world plunged as trade tensions escalated sharply. The S&P 500 dropped 6%, the Euro Stoxx 50 fell 4.6%, and the FTSE 100 closed 5.0% lower for the week—wiping out billions in value as investors tried to digest the implications of sweeping new tariffs and the risk of a full-blown trade war.

At the centre of the storm is the United States Government’s latest policy announcement introducing a 10% tariff on all US imports, with reciprocal measures escalating as high as 54% in some cases. China’s swift response—a 34% tariff on US goods, effective 10 April—has only amplified the uncertainty.

With global trade flows under pressure and financial markets struggling to reprice risk, investors are again searching for certainty.

Direct property stands out as a stabilising force.

Unlike equities, direct property doesn’t trade daily on sentiment. It is grounded in real-world fundamentals—tenants, leases, and physical assets that serve essential demand. Crucially, many sectors within direct property have low exposure to global trade shocks. The returns from medical centres, local convenience retail, self-storage, and suburban business parks are more closely tied to domestic drivers like employment, population growth, health spending and household formation, than to geopolitical flashpoints.

Historical data supports this. Research by Atchison and the Property Funds Association shows that over the long term, direct property delivers both solid returns and low volatility—an ideal mix when other assets are swinging wildly. Their analysis to 31 December 2022 shows Australian direct property produced average annual returns of 9.2% with volatility of just 2.7%. Compare that to Australian equities, which delivered a slightly lower 8.4% return but with five times the volatility (13.5%). A-REITs, despite being listed property, followed a similar path to equities with higher volatility.

Importantly, direct property is not just about income. For well-selected assets, capital growth plays a key role—particularly as cost-to-replace rises and rental demand strengthens. While REITs and listed markets feel the immediate impact of macro policy shifts like interest rate changes or trade moves, direct property values tend to move at a different pace, guided by supply, demand, and leasing fundamentals.

With equity markets now pricing in rising recession risk and investors facing a potential “deleveraging spiral,” as some analysts are calling it, capital preservation is back in fashion. Real assets—particularly direct commercial property—have long offered investors a steady, tangible anchor in their portfolio.

In uncertain times, where the outlook is as much about headlines as it is about fundamentals, it pays to hold assets that are decoupled from day-to-day sentiment. Direct property doesn’t just provide diversification—it provides refuge.

Natgen senior management attended the MSCI Private Assets briefing led by Head of Research Benjamin Martin-Henry. MSCI tracks institutional-sized commercial property transactions in Australia over 40 years, providing fund managers with key data to benchmark market trends.

Key takeaways included:

1. Property income remains resilient, with rental yields continuing to provide stability (see yellow bars in chart).
2. The market downturn is correcting, though recovery will be asset-specific rather than broad-based (see green bars in chart).
3. Transaction volumes rebounded in Q4, reaching post-COVID bounce levels.
4. Melbourne’s office market remains weak, with ongoing challenges. There continues to be a large price gap between where buyers and sellers wish to transact. It is expected that sellers will finally have to reduce their price expectations, to meet the market and close this gap.
5. Retail is performing strongly, particularly for assets acquired post-2020.

These insights reinforce Natgen’s investment strategy, which focuses on regional convenience retail, non-CBD office, specialist medical, industrial assets with rental reversion, and Natgen-led developments.

Most people assume that once a commercial property is acquired, the hard work is done – tenants move in, rent is collected, and the investment takes care of itself. In reality, maximising returns requires an ongoing, proactive approach. This is where active property management comes in.

What is Active Property Management?

Active property management goes beyond basic rent collection and maintenance. It involves continuously monitoring and optimising a property’s financial and operational performance. For Natgen, this means leveraging in-house expertise to enhance tenant satisfaction, maintain asset value, and drive long-term income growth. Whether it’s a retail shopping centre, an office building, or a specialised medical facility, each asset requires a tailored strategy to meet both investor objectives and market demands.

Why is Active Management Important?

Commercial real estate represent tangible, real assets that are influenced by economic conditions, tenant performance, and evolving market needs. Without active oversight, properties can quickly lose value due to poor tenant retention, ongoing vacancies, escalating operational costs, or building degradation.

For retail assets like shopping centres, ensuring the right tenant mix and optimising customer experience are key to increasing foot traffic and sales. Longer dwell times lead to stronger tenant performance, which in turn improves lease renewal rates and asset stability.

In office buildings, active management helps maintain occupancy by responding to evolving tenant needs, such as flexible leasing structures or upgraded amenities. With hybrid work models more common, landlords must adapt to stay competitive, and may introduce 3rd spaces such as shared meeting rooms or end of trip facilities to increase tenant satisfaction.

Specialty assets, like medical centres, require careful management of regulatory requirements, patient accessibility, and operational efficiencies. Ensuring a well-maintained, safe, high-quality environment directly impacts the viability of tenants such as healthcare providers, who rely on a stable setting to deliver essential services.

The Natgen Approach

At Natgen, we have a hands-on, strategic approach to property management. Our dedicated in-house team works closely with tenants, contractors, and key stakeholders to enhance asset performance. Where external property managers are engaged, our internal experts remain involved—conducting regular inspections, setting strategic goals, and ensuring alignment with each Trust’s financial objectives.

Natgen’s proactive management means identifying opportunities before they become challenges. From energy-efficient upgrades to negotiating lease renewals well in advance, our focus is on preserving and growing value for investors. Close tenant relationships, regular financial reviews, and data-driven decision-making by our property experts are core to our methodology.

By actively managing assets throughout their lifecycle—planning, acquisition, operation, and eventual sale—Natgen ensures each property remains competitive, profitable, and aligned with long-term investment goals. This level of engagement is what sets us apart in the industry, and delivers consistent results for Natgen investors.

Yes!

Many of our investors invest in Natgen Trusts via their self-managed super funds (SMSF).

Natgen Trusts acquire commercial property assets, and investors (including SMSFs) participate in our trusts to access commercial real estate assets for enhanced diversification and returns in their investment portfolios. This allows them to benefit from commercial property assets without the burden of managing them directly.

Being able to invest in commercial property in your SMSF is of course dependent on a number of factors, and it is always best to check with your accountant or adviser as to your own personal situation.

How much should my SMSF invest?

Typically, SMSF’s will have an investment strategy which will act like a road map for the fund’s trustees when they decide on investments. It is there to help the fund meet its sole purpose of providing members with a retirement benefit or to their dependents should a member die before retirement.

The investment strategy may be as simple as having a certain percentage of the fund’s investment allocated to each asset class, or be more complicated and prescriptive. Ultimately, the strategy is as individual as the members of the fund and set out why and how to invest these funds to meet these goals.

The Australian Tax Office (ATO) is the regulator for SMSFs and therefore have incredible oversight over how funds are run, and what assets they own. They published data [1] which shows that most SMSFs on average have anywhere between 20-32% allocation to property investments. This can be direct investment in residential real property, commercial real estate, limited recourse borrowing arrangements (LRBAs are specifically a structure to borrow to invest in property), or investment via unlisted trusts like the Natgen Investment Trusts.

[1] as at 30 June 2021

Commercial property assets help bring diversification to investment portfolios, and it is through diversification of asset classes and investments that help reduce risks and achieve more stable returns in the long run.

More about SMSFs

Self Managed Superannuation Fund (SMSF) Origins

Did you know that the Australian pension system is the 5^th largest in the world (behind the USA, UK, Japan, & Canada), and mandated to grow by more than 11.5% p.a? Not bad for a country with a population (just under the size of the city of Shanghai) of ~26.7million and with around ~$3.8 trillion in savings.

Australians have been providing for one another since 1909 with the introduction of the publicly funded Aged Pension in 1909. But it wasn’t until Prime Minister Paul Keating enacted the Superannuation Guarantee on July 1^st, 1992 which saw employers [1] contribute 4% of their employees’ wage to their superannuation account.

Since then, Australia’s retirement income system has been viewed as a model for other nations with its 3 pillar approach of;

1. Publicly provided means tested age pension
2. Mandatory private superannuation savings; and
3. Voluntary saving (including voluntary superannuation saving) [2].

As our pension system evolved, it wasn’t until the Wallis Inquiry in 1999 which allowed small businesses and the self employed to establish and manage their own superannuation accounts – creating the very first SMSFs [3].

What is an SMSF?

A self-managed superannuation fund (SMSF) is a private fund that you can manage yourself, as distinct from an industry or retail fund where those funds choose investment and insurance options for you. But having that level of control over your own fund also comes with a number of rules and responsibilities [4] to ensure your fund meets the sole purpose test of providing retirement benefits for members.

Investment Restrictions

The Superannuation Industry (Supervision) Act 1993 (SIS Act) is the legislation outlining the various rules trustees must follow when managing an SMSF.

SMSF investments must be made on an arm’s length basis; meaning that the purchase and sale price of fund assets should always reflect the true market value, as should income from the fund assets.

There are a number of rules outlined in the SIS Act to ensure a fund meets the sole purpose test. They affect how and what your fund can investment in such as;

Source ATO [5]

The table above highlights some of the concepts, but of course Trustees should consult with the ATO website and their professional advisers with how this relates to their situation.

• [1] Employers with an annual payroll above $1m
• [2] Towards higher retirement incomes for Australians:  a history of the Australian retirement income system since Federation
• [3] Superannuation in Australia: a timeline
• [4] Further details on the risks and responsibilities of an SMSF are here: Self-managed super fund (SMSF)
• [5] Restrictions on investments