Tough times ahead for property trusts

The Commonwealth Bank has warned of risks to the future performance of listed office and retail property trusts. While its fund managers say they have not seen any downturn yet, they warned yesterday that higher interest rates and possible job cuts by office tenants could drag down returns. The manager of the Commonwealth's Property Office Fund, Charles Moore, said that while a softening in demand is expected, supply should remain in check until at least 2010. "In addition, with the higher cost of debt finance and lenders tightening their lending policies, we believe a number of projects may be postponed if major pre-commitments are not achieved," he said.

Source: Sydney Morning Herald