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As Australia's commercial property market shows signs of recovery in 2025, driven largely by strong infrastructure investment, employment growth, and property demand, turning to commercial real estate for your self-managed superannuation fund (SMSF) may be worth considering.
A recent report by CBRE revealed the industrial sector is leading the growth, with transaction volumes surging 98% annually to $5.4 billion, followed by retail, increasing 29% with $4.7 billion in deals.
Purchasing a commercial property through your SMSF can offer several financial and strategic advantages.
Among the many Aussies who have bought a commercial property through their SMSFs are Adelaide-based IT manager Paul and his wife.
After consulting with their financial adviser, Paul decided to set up an SMSF and purchase a commercial unit through it. The property was to become the new and permanent home for his wife's Pilates studio.
One of the unique advantages of this setup is that your business can lease the property from your SMSF at market rates. This means your business pays rent into your super fund, which is both a tax-deductible expense for the business and a tax-effective income stream for the super fund.
Additionally, assets in an SMSF are generally protected from creditors if you or your business were to face legal action or bankruptcy, offering a layer of financial protection.
When is the best time to invest in commercial property with your SMSF?
Residential property in quality growth markets typically offers stronger long-term capital gains than commercial property. Commercial real estate assets, on the other hand, are excellent for generating cash flow.
This makes investing in commercial properties an ideal strategy for SMSFs in the pension phase.
"One of the best strategies is to focus on residential property inside an SMSF during the accumulation years. Building equity in residential markets allows your fund to grow rapidly over time, taking advantage of leveraged growth while maintaining liquidity," said Darren Venter, property strategist and founder and CEO of The Investors Agency.
Once retirement age is reached and the SMSF enters the pension phase, Mr Venter said it is then the right time to own commercial assets outright inside an SMSF "because it creates strong, predictable income streams to fund pensions".
Investing in commercial property during the pension phase presents an opportunity to realise capital gains without paying tax, as rental income and any other earnings (e.g., interest, dividends, etc.) supporting pension payments are taxed at 0%.
Additionally, if the SMSF sells a commercial property that has appreciated, no capital gains tax is payable, regardless of the length of time the asset has been held.
Choosing the commercial asset to invest in
Whichever commercial asset you choose depends, first, on your SMSF investment strategy. This legal document outlines how the fund will be managed to achieve the retirement goals of its members.
When choosing among office, industrial, and retail commercial property, several strategic, financial, and compliance-based factors must be considered. Here are insights to help you decide which asset type to choose.
Office
If located in prime locations like CBDs or major suburban hubs, an office property may offer solid long-term capital growth.
Add in modern fit-outs, and you could be looking at attracting stable tenants with longer lease terms relative to other commercial properties. That said, secondary-grade assets lacking in modern amenities or non-ESG-compliant buildings may be challenging to lease.
While the lease terms are longer, offices are at higher risk of prolonged vacancies, considering the rise of hybrid work models. Offices also tend to have higher maintenance and management costs, which typically include air conditioning, cleaning, and strata fees, among others.
For the fund's exit strategy, note that offices may take longer to sell, especially in oversupplied markets or downturns.
Industrial or Warehouse
Industrial properties or warehouses may deliver higher yields compared to other commercial real estate, especially in high-demand logistics hubs. Prospective tenants include logistics, trade, and storage. Vacancies are shorter and tenant turnover is lower on the back of sustained demand and limited supply.
According to Chris O'Brien, executive director of CBRE Industrial & Logistics, Capital Markets division, Australia currently needs 6.2 million square metres of new floorspace to accommodate the industrial and logistics sector over the next four years.
Note, however, that with such property, proximity to transport, major roads, and urban centres is key.
Retail
Yields can be attractive in neighbourhood centres or specialty retail, but growth potential depends on tenant mix (i.e., essential or discretionary retail) and changing consumer behaviour (vulnerability to e-commerce trends).
Retail assets are highly sensitive to economic cycles and tenant type. High foot traffic, anchor tenants (e.g., supermarkets, healthcare providers, etc.), and ample parking are essential for performance.
However, researchers argue the retail sector, which is valued at approximately $400 billion, remains resilient.
"Despite cost-of-living pressures, the pandemic, and sticky interest rates, retail sales and foot traffic have remained buoyant," said Kate Bailey, CBRE head of retail and alternatives research.
"Furthermore, limited new regional and subregional supply will be delivered over the next three years. This will help drive sales densities in existing centres and support rent growth, making the retail sector attractive for investors," she added.
Note, however, that similar to offices, retail properties typically have high outgoing costs that can eat into returns. It's vital to review tenant lease structures to determine who covers these costs.
Bottom line
When it comes to investing in commercial property through your SMSF, there is no one-size-fits-all choice. The most suitable asset class will depend entirely on your fund's investment strategy, risk tolerance, and diversification goals.
Whether it's an office, warehouse, or retail property, each carries its mix of benefits and trade-offs, from yield potential and capital growth prospects to tenant stability and liquidity.
Ultimately, the best investment decisions are those that strike the right balance between consistent income, long-term value, and full compliance with superannuation laws, ensuring your SMSF stays on track to meet your retirement objectives.
It's essential to seek guidance from a qualified SMSF advisor and a commercial property specialist to navigate the complexities of regulations and market dynamics and find the financing tailored to your needs.
Fortunately for Paul, their financial adviser recommended loans.com.au as we offer specialised SMSF Commercial Loan options, which aren't readily available elsewhere.
Paul, loans.com.au SMSF commercial property customer
Our online system guided Paul every step of the way, offering transparency, seamless communication, and quick document processing.
"The whole process was seamless from start to finish. This was our first time doing a loan entirely online, and while I initially had some doubts, the platform was incredibly clear and easy to use," Paul shared.
"Communication was spot-on, and the documentation team was exceptionally prompt - documents were checked and approved within a day, which is a big contrast to other experiences we've had."
"Thanks to loans.com.au, we were able to act quickly, buy the property, and set our business up for the long-term," he added.
Paul's wife is now operating out of a beautifully renovated, street-facing studio with better visibility and foot traffic.
If you're like Paul and looking to invest in a commercial property through your SMSF, loans.com.au offers competitive commercial SMSF loans tailored to your fund's retirement goals. Speak to our lending specialists today.
Image by wrstmpl on Unsplash
