Natural disasters and Coronavirus pile pressure on already-struggling Gold coast retail market: HTW Commercial

Natural disasters and Coronavirus pile pressure on already-struggling Gold coast retail market: HTW Commercial
Natural disasters and Coronavirus pile pressure on already-struggling Gold coast retail market: HTW Commercial

The extremes of drought, fire and floods, a potential virus outbreak, and other economic challenges, have taken their toll on the Gold Coast retail market, according to the latest report from valuation firm Herron Todd White.

“Stagnant wage growth and changing spending habits have been major contributors to lacklustre retail performance, while the increase in online shopping has had an impact on traditional bricks and mortar retailing,” the March report found.

Further, many established retail centres within the Gold Coast’s suburban areas have been impacted to some degree by the increase in online retailing, as well as restaurants and cafes.

In general, throughout 2019 there was increased stress on retail tenants on the Gold Coast, resulting in downward pressure on rents and upward pressure on incentives - A similar situation is expected throughout 2020.

“Landlords should consider rental affordability rather than purely the rate per square metre achievable and should carefully weigh up the pros and cons of having a tenant in place at an affordable (although possibly lower) rental, versus achieving a higher rental with greater risk of tenant failure. The global retail landscape is changing and local retailers and property owners must be aware and adapt as best they can,” the firm added.

Locally, broad examples of reinvention include the growth in quality cafes and restaurants in the suburbs on the southern Gold Coast, the creation of a China Town within Southport and on a more general scale, the increased number of convenient, drive-through cafes and food premises.

“The one saving grace is the current historically low interest rate environment, which commentators predict will stay lower for longer,” the report said.

Therefore, while rental levels have been impacted, yield levels have firmed and investor appetite for a return on investment is strong, helping to protect property values. The following case study is indicative of the strong results being achieved for quality retail investments, with recognised tenants and long WALEs.

The Pimpama Service Centre sold in September 2019 for $16.35 million, reflecting an analysed yield of 5.81%.

It was purchased by a high net worth private investor after an extensive marketing campaign.

This is a modern service station and fast food complex completed in 2018, located within a developing retail precinct at Pimpama on the northern Gold Coast. It is anchored by a United Petroleum service station and there are five fast food tenancies, including Carl’s Jr, Red Rooster, Pizza Hut, Zambrero and a Chinese restaurant.

The WALE equates to 11.27 years (by income).

The valuation firm ultimately concluded that “strong demand from investors for quality retail investments on the Gold Coast will continue throughout 2020, with the low interest rates and desirable location attributes maintaining yields at firm levels.”

In terms of overall retail property values, the firm also considers that the weaker rental market will be offset to some degree by the firm yields being achieved.

However, for long term success, it will be imperative for all stakeholders to carefully monitor changing retail and cultural trends, both locally and abroad and to adapt as best they can.

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Gold Coast Herron Todd White

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