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Recovering large format retail stores offer hope for future commercial investment

By Greg Bell

The global financial crisis (GFC) was a massive hit to many industries across the nation. For a few years, everything from real estate and construction through to commercial and retail was affected, with many of these sectors only now starting to reach pre-GFC levels of activity and value. Luckily, the recovery is well underway – large format retail property has grown significantly over the last 12 months and is heading towards an upswing expected to last well into the coming years. 

This could be encouraging for those consider investment in commercial real estate in Surfers Paradise in the near future. BIS Shrapnel's recent Large Format Retail Property report has has offered some insight into this market, which is anticipated to see stronger consumer spending and increased economic yields. Not only is this great for the owners of this particular type of real estate, but it's also a great supplement to the continued development of the Surfers Paradise economy. 

Senior Project Manager and report author Maria Lee said demand for household goods – which comprise the biggest component of large format retail expenditure – saw a huge 4 per cent growth over the 2013/14 period. This pace of growth is expected to continue for at least another three years before moderating out to a sustainable level. Furthermore, this follows five years of averaging less than 1 per cent – making this a significant increase for the nation. 

"The improvement in market conditions can be attributed largely to the pick-up in the housing market – greater construction and transaction activity is underpinning home-related expenditure. The home improvement sector has been slower to recover but has now also picked up. However, the dwelling building upswing is far from uniform across states," said Ms Lee in an 11 December statement.

Strengthening residential construction across Queensland 

For example, a 24 November release from the Housing Industry Association found new dwelling commencements were to increase by 13.9 per cent over 2014 to just over 37,000, after a 13.4 per cent growth in 2013. Executive director for Queensland Warwick Temby also said another 8 per cent growth over 2015 was expected. 

"Queensland is in the midst of a sustained upswing in new home building, with activity bouncing back strongly from the difficult post-GFC years. New dwelling commencements are finishing off their second consecutive year of strong growth, with more to come over the next few years. New dwelling starts in Queensland are enjoying their strongest year since 2008," said Mr Temby. 

Furthermore, new home lending has risen to an all new high across the nation, with Queensland experiencing a 4.9 per cent increase over September alone. HIA chief economist Harley Dale said this was the highest point home lending has reached in 20 years, demonstrating that now is a particularly attractive time for borrowers to seek out financing for real estate.

"That is a healthy result in terms of the short-term outlook for new home construction. The demand for new housing reflects activity from first home buyers, trade-up owner occupiers, and investors," said Mr Dale in a 10 November statement. 

Additionally, in the BIS Shrapnel report, Ms Lee said that the strong supply additions seen over the last few years coupled with the high demand is expected to lead to a significant growth in rental yields and a higher profit margin. In fact, the expectation over the next five years is an expected 12 per cent boost in investment yields – providing plenty of incentive for those interested in expanding their portfolio into commercial Surfers Paradise property in the coming years. 

Now could be a great time to get in touch with a local real estate agent to begin looking into the commercial property options available to you in Surfers Paradise. 

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