Retail property delivers decent returns

By Greg Bell

Large format retail leasing on the Gold Coast could be at the forefront of commercial investors' minds, as it emerges that many experienced strong returns over the course of 2015. In fact, double-digit capital growth was witnessed in many areas, BIS Shrapnel explained, and it's not expected to recede any time soon.

Identifying potential growth hot spots

The Large Format Retail Property Report identified that consumer demand for retail services is especially strong at the moment, especially along the eastern seaboard. This bodes well for commercial property on the Gold Coast, providing consumer spending remains as buoyant as it has been over recent months.

Optimism plays an important role in many parts of the economy, including commercial real estate. A report from PricewaterhouseCoopers (PwC) predicted that 2015-16 will be an especially strong year for the retail sector, with Australia and Asia expected to see the highest volume growth out of any region.

This is partly a result of increasing incomes and the slowdown experienced in China, which in many cases will encourage retailers to take a closer look at their domestic markets. This may encourage greater commercial property investment in core locations such as the Gold Coast.

Dealing with domestic economic challenges

It's not just conditions in Asia that have created the need for retailers to take a closer look at their operations, but also those here in Australia. The BIS Shrapnel report identified that the depreciation of the Australian dollar has played an important role in the sector – and it may have had more of a positive impact than many people realise.

Report author Maria Lee, who is also the senior project manager at BIS Shrapnel, suggested that the fall in the domestic currency came at a time when consumer spending was still strong. This limited its effects and ultimately worked in the favour of the retail industry.

"Even if margins are squeezed, if turnover is growing solidly, then overall profitability and the ability to pay higher rents can still increase," Ms Lee commented.

Predictions for the future

As already suggested, this current boom in retail property is expected to have some longevity. BIS Shrapnel forecasts that average growth in rental prices will exceed three per cent over the next five years – that's significantly better than the less than one per cent seen in the past half-decade.

Investment yields are also expected to improve at least in the near term, which Ms Lee predicts will have a positive impact on capital values.

Meanwhile, PwC anticipates that some of the biggest players in the retail sector will start to move their attention towards smaller markets. These regions are typically supported by strong population and income growth, offering further opportunities for expansion.

Make your mark on the Gold Coast

The Gold Coast is ideally placed to make the most of these forthcoming opportunities. It's a city big enough to offer space and infrastructure, but is immune from some of the difficulties larger locations have faced both in Australia and beyond.

Large format retail property is predicted to be one of the most in demand pieces of commercial real estate over 2016 and beyond, so why not take a look at what's on offer? Whether you're a business that is just starting out or you need to upscale your operations, we're on hand to help.

Speak to the experts at Ray White Commercial Gold Coast for an insight into what makes this part of Queensland such a desirable place to invest.

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