Valuation upside alongside stable income returns stands out in unstable markets
InvestmentMarkets CEO Darren Connolly says many self-directed investors are taking a closer look at how different asset classes hold up when inflationary conditions come to the fore. This renewed focus is leading them to examine the underlying mechanics of commercial property more closely.
“We’re seeing deeper engagement with the fundamentals behind each asset class – particularly what actually drives performance,” Connolly said. “Investors want a clearer picture of how a product can work for them as market and economic conditions change.”
This shift in thinking reinforces what GDA Group CEO and fund manager John Di Monda has observed, noting that commercial property continues to stand apart because of its income profile and opportunity for value uplifts and capital gains over time.
According to Di Monda, the combination of contracted income on long-term leases gives commercial property characteristics that behave differently from listed markets, particularly during inflationary periods. “Commercial property is a tangible asset with stable rental income and the potential for long-term capital growth,” he said. “Because leases often include fixed or CPI-linked increases, income tends to be more resilient when inflation runs higher.”
He also noted that unlisted property funds are priced through periodic independent valuations which leads to smoother performance compared with A-REITs and equities. “Unlisted valuations move when there is real market evidence such as comparable transactions,” he said. “They don’t swing with equity market sentiment, which helps reduce measured volatility.”
Di Monda explained that their unlisted property fund strategy is shaped by asset diversification, an active management style, maintaining optimal gearing, and a bottom-up approach to asset selection. “There is no single value driver,” he said. “Diversification allows us to adjust between industrial, retail and office sectors as conditions evolve, and value-add initiatives - redevelopments, asset upgrades or tenant amenity improvements allow us to capture value over time.”
“Having projects at different stages of development helps smooth outcomes and provides additional resilience when conditions are more challenging,” he added.
Looking toward to 2026, Di Monda said the trajectory of inflation remains the key variable. “We’ve had strong population growth and limited new supply, which ultimately supports property demand and asset values. But the recent lift in trimmed mean inflation has raised questions about further rate-cuts. How inflation behaves from here will heavily influence how positive an upswing we see from here.”
Connolly said these considerations reflect a broader shift in how investors are preparing for the year ahead. “Self-directed investors are deliberating what to do if inflationary pressures become more sustained and commercial property is one way to adapt if the pressure doesn’t dissipate.”
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