SILVIO PROPERTY NEWS

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Commercial Real Estate Brisbane

WHAT TO LOOK FOR WHEN INVESTING IN BULKY GOODS PROPERTY

As residential markets prosper so does demand for white goods and furniture. Commercial property investors interested in bulky goods property should look to new homemaker centres in growth centres showing an upswing in dwelling commencements, mixed with established housing.

 

Big box facilities are less affected by competition from internet retailers than other sectors of the retail market. The internet helps people to find what they want to buy but the vast majority of consumers still like to visit the showroom before they commit themselves to large purchases such as furniture and white goods. Good tenants who advertise online attract customers and use the internet to educate buyers on their products so that when they arrive in-store they know what they want and are ready to buy it.

For investors considering a move into the bulky goods retail sector, here are some key factors to watch for:

For investors considering a move into the bulky goods retail sector, here are some key factors to watch for:

>>The best location is a position with a mix of old and new housing. Established housing provides the present market, with occupants renovating or replacing old furniture, on top of their mortgage and with disposable income. New housing will provide the future market. New homeowners usually take five years to get on top of their mortgage repayments, only buy essentials initially and have a lower disposable income.

 

>>Look carefully at the existing and future population in the catchment. Older people spend less, younger families spend more. The stronger the demographic the more disposable income.

 

>>Does the centre have access to arterial roads and freeways, ease of entry and egress from the main road, without negotiating service roads, and full directional signage for the main entry and exit.

 

>>Good general exposure for the centre gives brand exposure and centre identity, while a wide frontage maximises the exposure of each retailer.

 

>>Look for simple, uncluttered facades with wider fronted showrooms (a minimum frontage of 18 metres) and a mixture of tenancy sizes to maximise variety of uses and tenancy mix. 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 100sqm of building.

 

>>The longer the average lease expiry the better. Varying lease expiry dates ensure there is no threat of multiple showrooms being vacated at the same time and prevents tenants colluding to negotiate rents downward.

 

>>Look into the rental review mechanisms. An open market at the lease options is preferred to maximise rental growth.

 

>>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 less likely to fail and a good mix facilitates cross shopping and comparison shopping.

 

>>Is there much land zoned within the centre’s catchment that could enable the construction of a competing or better centre? Does the centre have a market monopoly because nothing else is appropriately zoned? The more flexible the zoning the more variety of uses will be allowed into the centre.

 

>>Are the leases with the franchisors or the franchisees? Head company leases are preferable.
>>What are the ongoing opportunities? For example, is there scope to improve signage on pylons as well as on showrooms? The ability of tenants to paint in their corporate livery injects life into the centre and improves their identity. Is there an opportunity to maximise the centre’s presentation and landscaping? A good looking centre attracts customers and tenants. A café on site allows customers to rest and have time out to make decisions.

 

>>Watch out for any pitfalls, including difficult access, poor signage, larger and better centres either existing or proposed in the catchment, non-functional layout, too many B and C grade tenants or poor property management that is causing tenants to leave.
As with all commercial property investments, if you are considering investing in big box retail be sure to combine the right timing with research and analysis to minimise risk and achieve long-term results.

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