Following recent federal budget changes that removed negative gearing for established residential property, many investors are reassessing their strategy. What those changes did not remove is the largest intergenerational wealth transfer in Australian history, which is already underway and accelerating.
Over the next two decades, trillions of dollars in assets are expected to pass from Baby Boomers to their children and grandchildren. Much of that wealth has traditionally been tied to the family home or a residential investment portfolio built one purchase at a time. But the next generation faces a fundamentally different landscape. And increasingly, the asset class shaping how that wealth is preserved is not residential property.
It is now commercial property.
A different question for a different generation
The problem is that the next generation cannot simply repeat what worked for the last one. Property prices have risen dramatically over three decades. Affordability remains a genuine constraint in every major capital. And budget changes to negative gearing have removed much of the tax benefit that made low-yield residential investment viable for ordinary Australians.
If residential property built the last generation’s wealth, the question facing investors now is what builds the next one. Commercial property is increasingly becoming part of that answer.
Why the income case is different
Commercial property covers warehouses, industrial facilities, medical centres, childcare centres and retail premises. Where residential yields sit between 2 and 4 per cent in most capitals, commercial assets frequently deliver 5 to 8 per cent or more. That gap compounds over the long term.
Commercial leases commonly extend for five, ten or fifteen years, with rent reviews built in from the outset. Tenants are often responsible for outgoings including rates, insurance and maintenance, reducing both the management burden and income volatility. For a family focused on preserving wealth across generations, predictable income matters as much as capital growth. In many cases it matters more.
Industrial property and the SMSF connection
Within commercial property, industrial assets have been among the strongest performers, driven by e-commerce and logistics expansion. An increasing number of business owners are now purchasing their operating premises through an SMSF, paying rent into an asset they control while building retirement wealth in a concessionally taxed environment. For family businesses this creates a genuine mechanism for transferring wealth across generations while keeping control of the underlying asset within the family.
What has not changed
Commercial property is not a guaranteed path to wealth. Vacancies can run longer than residential. Entry costs are higher and the knowledge required to select the right asset is more specialised. That simply means due diligence matters more, not less.
The shape of the next chapter
The next great Australian wealth transfer is unlikely to look like the last one. The question for Australian families is no longer whether commercial property belongs in the conversation about generational wealth. It is whether ignoring it means missing one of the most significant opportunities of the next two decades.
