Beyond income: what unlisted property actually does in a private wealth portfolio

For much of the past decade, unlisted property investment occupied an uncertain position in private wealth portfolios.

Advisers who used it tended to be selective about it. Those who did not point to liquidity, complexity, or the fact that many clients already carried property exposure through their personal balance sheets.

That positioning has shifted. Among private wealth advisers and high-net-worth clients, the conversation has changed in tone, if not always in allocation size.

Advisers increasingly treat unlisted property as something a well-constructed portfolio should hold rather than something it might hold, provided the client fits the profile and they size the allocation accordingly.

Unlisted property investment: more than an alternative

Ask Dylan Tomkins, Director of Wealth Management at Centennial, what job unlisted property should do in a portfolio and the answer covers more ground than many investors might consider.

“Unlisted property will do multiple jobs within a balanced portfolio,” he says. “It provides reliable income, a stabiliser against listed market volatility, and a growth story in the right assets, sectors and locations.”

The range of risk profiles within the asset class adds to its flexibility as a building block. From lower-returning core assets to value-add and development strategies, an adviser can calibrate their allocation based on their return objectives. The trade-off is liquidity, and how much of it they are willing to give up.

For wholesale investors, the strongest case increasingly sits at the value-add end. Returns come from what a manager does with an asset, not the yield it happens to pay.

The pure yield play belongs to a previous cycle. The asset class is now better understood as a total return proposition.

Tomkins is also direct about the label that has followed the sector for too long. “The ‘alternative’ label is outdated,” he says. “With the evolution of the asset class, it is highly accessible, well-evidenced, and should be captured as a structural allocation where diversification and return benefits are proven.”

How advisers are incorporating it in practice

Alex Thompson, private wealth adviser at Viola Private Wealth, sees merit in deploying unlisted property where the assets offer a compelling market opportunity. “We selectively incorporate some thematically driven unlisted property strategies, typically via syndicate opportunities where downside mitigation is particularly strong,” he says.

In those cases, the allocation is less about capturing broad market beta and more about accessing targeted opportunities with clear demand fundamentals.

What sits behind the returns

David Cupit, Head of Funds Management at Centennial, grounds the answer at the asset level. In his view, value creation and income are not separable, and the quality of one reflects the quality of the other.

“Our focus is on driving total returns,” he says. “This is achieved by acquiring mispriced, misunderstood assets at good value and driving income and capital growth through active management.”

The levers involved are specific: increasing lettable area, attracting high-quality tenants, building in structured rent reviews and targeting locations where tenants need to be. Together, these are what generate growing income and maximise value over the life of the investment.

Where this approach matters most is when conditions tighten. “High quality, active assets with multiple value levers matter most in softer parts of the cycle, not just income,” Cupit says.

Passive assets that depend entirely on income tend to track the broader market. That reduces the manager’s capacity to hold or create value when the environment shifts.

On the risks, he is direct. “Vacancy, default and falling valuations are the genuine risks. Active management, including tenant contact, early renewals, capex and strategic exits, materially reduces their likelihood.”

Sizing and liquidity

Liquidity is the objection advisers hear most when unlisted property investment comes up with clients.

Noah Langerak, financial adviser at Wattle Partners, frames the trade-off plainly. “Investors are generally locking up capital for five to ten years, and that illiquidity premium is what drives the enhanced returns,” he says.

“Like any property investment, valuations are sensitive to interest rates and borrowing costs, and it should make up a portion of your portfolio, not the whole thing.”

Tomkins offers a reframe for the adviser-client conversation. “Clients don’t need 100 per cent of their portfolio liquid. They need income and capital access met. Accept the constraints in exchange for more stable income and higher total returns, and have that conversation clearly upfront.”

On sizing, Tomkins says the answer depends almost entirely on the client’s liquidity profile. Those with low liquidity requirements might allocate as much as 20 to 30 per cent, taking full advantage of the long-term benefits the asset class offers.

Those with higher requirements or lower appetite for illiquid assets might sit closer to 5 per cent. Some may choose not to participate at all.

The framework, he says, should start with what the client actually needs access to, and work backwards from there.

What advisers most often get wrong

Alex Edwards, Head of Capital at Centennial, has one observation that cuts against a common assumption in private wealth. Many investors treat a higher distribution yield as a signal of better quality or stronger performance. In his experience, the relationship often runs the other way.

“A higher distribution yield more often than not means the asset itself isn’t as superior or attractive to tenants or capital,” he says. “The risk of finding new tenants is high, as well as the risk of finding a deeper pool of prospective purchasers at exit.”

With high-net-worth and SMSF investors, Edwards sees unlisted property serving a clear purpose. It acts as a growth anchor with stable income, providing the benefits of direct property ownership without the management responsibilities that come with it.

When building portfolios for clients who can accept the liquidity terms, the case is well established.

The asset class rewards patient capital with total returns that reflect the quality of the underlying assets and the work done to improve them. It produces income that listed market volatility rarely touches. It also behaves differently from equities and fixed income through the cycle.

The question for most advisers is not whether it belongs, but how to size it well and set the right expectations from the start.