As residential markets pick up, so does demand for bulky goods – white goods and furniture – creating a resurgence in large format retail property sales.
Investors should look to new homemaker centres in growth areas showing an upswing in dwelling commencements, mixed with established housing.
In its latest Insight report into Key Australian Retail Transactions, Savills Australia found that a resurgence in large format retail property sales is tracking the housing market recovery, with sales in the past two years totalling nearly $1.3 billion.
The report anticipates current market fundamentals will continue to drive investors’ attraction to large format retail property, particularly in key growth corridors. Melbourne’s southeast, northern and western growth corridors are highlighted as areas with substantial population growth that could immediately sustain a large format retail centre.
For investors considering a move into the large format retail sector, here are the key factors to watch:
- The best location is a position with a mix of old and new housing. Established housing is the present market, with occupants renovating or replacing old furniture. They are on top of their mortgage and have disposable incomes. New housing is the future market. Homeowners usually take five years to get on top of their mortgage repayments. They only buy essentials initially and have lower disposable incomes
- Look at the existing and future population in the catchment. The stronger the demographic, the more disposable the income
- Does the centre have access to arterials and freeways, ease of entry and egress from the main road, and full directional signage for the main entry and exit?
- Look for simple, uncluttered facades with wider-fronted showrooms (a minimum frontage of 18 metres) and a mixture of tenancy sizes for maximum variety of uses and tenants. An ability to combine or subdivide showrooms maximises size flexibility and segregation of loading from customers. Ideally, there should be 2.5 car spaces per 100sq m of building
- Are there anchor tenants? Quality tenants attract other tenants and maximise potential achievable rents. A variety of uses attracts more customers. Major names attract more customers, national names are likely to be far more successful and a good retail mix facilitates cross-shopping and comparison shopping
As with all major commercial property investments, combining the right timing with research and analysis helps to minimise risk and achieve long-term results.