The $3.5 trillion wealth shift: A new era of investors in commercial real estate
A wave of affluent young buyers has entered Australia’s commercial property market, leveraging generational wealth, and this trend is set to surge. Abandoning the complexities of residential property, these buyers are drawn to high-quality, strategically located assets that offer stable returns and significant growth potential.
Millennials and Gen Z increasingly recognise commercial real estate as a savvy investment aligning with their financial aspirations and lifestyle choices. This influx of capital marks a pivotal shift for the sector, enhancing its attractiveness and generating heightened interest in lucrative opportunities.
According to the Australian Financial Review, Millennials and Gen Z are expected to inherit an estimated $224 billion each year by 2050. The combination of record property prices, superannuation wealth, and fewer heirs will result in a $3.5 trillion windfall for younger generations, benefiting even less affluent Australians.
The Productivity Commission’s first official study of wealth transfers in Australia projects a fourfold increase in the value of inheritances over the next 30 years. This massive transfer will drive demand for commercial property as younger investors seek to diversify portfolios and capitalise on the long-term stability offered by this asset class.
This unprecedented windfall is set to reshape Australia’s investment landscape, with commercial real estate poised to benefit from the influx of capital and the fresh strategies of a new generation of property owners.
New investors are drawn to the security and long-term returns provided by commercial real estate, particularly in key asset classes such as retail, industrial, and mixed-use developments. The influx of capital from this generational wealth transfer is expected to further reduce transaction times, highlighting the strong appeal of high-quality commercial properties.
As this growing cohort inherits significant wealth, they gravitate towards commercial real estate, recognising its role in providing stability and sustainable returns. Interest in asset classes like healthcare and industrial properties is rising, positioning the commercial market to benefit from this surge in new capital and changing investment strategies.
This generational wealth transfer is anticipated not only to drive market growth but also to reshape commercial property investments. Younger investors increasingly prioritise sustainable, adaptable, and tech-driven properties, leading to heightened demand for flexible office spaces, eco-friendly industrial facilities, and modern mixed-use developments.
This shift reflects the evolving preferences of a new class of investors who seek to innovate and modernise their portfolios. As these younger individuals take financial control, their investment strategies will transform the market, ensuring that commercial property continues to thrive as a critical component of wealth-building for years to come.
The commercial property market is set not only for growth but also for a transformation, driven by a new generation of investors aiming to align the sector with their values and lifestyle preferences.
Building wealth for future generations through family offices
Family offices have long been essential in preserving and growing wealth across generations. With the impending multi-trillion dollar wealth transfer, these private entities are poised to play an increasingly important role for young investors.
By focusing on stability, growth, and sustainability, family offices strategically invest in well-established assets leased to trusted brands like Bunnings, McDonald’s, KFC and other high-performing names. These properties, characterised by long-term leases, high occupancy rates, and reliable cash flow, are particularly attractive for building intergenerational wealth.
Family offices also provide essential guidance that empowers younger family members to make informed investment decisions. This often includes prioritising stable, recession-proof assets in sectors such as fast food, early education, healthcare, convenience and large format retail.
As more young investors turn to family offices, they become better equipped to build, preserve, and diversify their wealth, aligning their strategies with personal values and long-term financial goals.
Case Studies
Commercial investments offer solid growth, making them increasingly attractive to family offices and generational wealth funds focused on long-term value and stable returns. With standout resales like Toyota in Echuca, Busy Bees in Carrum Downs, and KFC in Wellington, these high-performing assets across automotive, childcare, and fast food sectors appeal to those seeking dependable, lasting growth for inheritance and legacy planning.
Toyota, Echuca, Vic
Purchased in 2007 for $2,450,000 on a 5.55% yield, this Toyota dealership in Echuca was resold in 2022 for $6,100,000 at a 4.55% yield. This impressive transaction delivered a 148.98% increase, underscoring the strong appreciation and appeal of automotive assets over time.
Busy Bees, Carrum Downs, Vic
Originally sold in 2014 for $3,075,000 on an 8.33% yield, this Busy Bees childcare facility in Carrum Downs was resold in 2022 for $5,400,000 on a 5.56% yield. This transaction reflects a 75% increase, highlighting the strong growth and stability within the childcare investment sector.
KFC, Wellington, NSW
Purchased in 2016 for $1,665,000 at a 5.49% yield, this KFC in Wellington was resold in 2022 for $2,600,000 on a 3.88% yield. This sale delivered a substantial 60% increase over six years, demonstrating the enduring demand for fast food assets and their attractive capital growth.