Resurgence in Gold Coast retail market after bumper 2016: HTW

2016 was a bumper year for the retail investment market on the Gold Coast and early indicators suggest that 2017 should hold its form as well, according to Herron Todd White’s recent report.

The property valuation firm says that retail is currently the strongest of the commercial asset classes on the Gold Coast, following the national trend of being a highly sought after investment for private individuals, SMSFs and syndicates.

However this high demand and reluctance of owners to sell is resulting in a very limited availability of stock and a reduced volume of sales.

"The result is that the yield gap between primary and secondary properties is narrowing," the report stated.

Some notable sales in 2016 include:

• Reedy Creek Shopping Centre, anchored by Woolworths, 5.8 percent;

• Moo Moos Steakhouse, a strata retail restaurant at Broadbeach, 6.2 percent;

• 7/11 and McDonalds at Palm Beach, 6 percent; and

• Norfolk Village Shopping Centre (no anchor tenant), 6.9 percent.

This demonstrates that an array of different property types including strata, freehold, national and local (albeit well established) operators are all achieving prices within 110 basis points of each other.

“In terms of looking at the year ahead, we often reference the Ray White January 2017 auction event which is one of the largest commercial auctions of the year.

Nine of the 23 properties sold on or before the auction, with active bidding on all but three of the properties.

All in all, a good indicator that market sentiment remains strong,” the report stated.

But with such a strong head of steam, it is important for investors to critically analyse what they are looking for in an investment, be it capital growth, a steady income stream or the opportunity to value add.

"With yield levels and interest rates at historic lows, further yield compression would appear unlikely.

In fact as the gap between primary and secondary property narrows, the risk of a correction increases for the latter.

A steady income stream is clearly an outcome any investor would be trying to achieve," the report advised.

But the reality is that consumer sentiment can be volatile and property owners are still prone to tenant businesses having periods of good and bad trading.

Securing a property with national tenants will be the best way to decrease this volatility, but it will come at a price.

"As we move into 2017 it will be important for investors to differentiate properties with a higher number of local businesses; this higher risk profile should command a higher investment return.

Value adding is an investment strategy reserved for the more entrepreneurial property owners out there.

The opportunities do not come up often and when they do are commonly disguised as a pretty average investment.

The benefits can be twofold if embarking on such a project - the prospect of increasing rental potential whilst attracting a firmer investment yield on completion to compound capital growth.

Patience and a level head will be keys to success in 2017," the report suggested.