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Insights from Nathan Moore, director at Ray White Commercial, Bayside
Retail is one of Queensland's most promising sectors, growing by an average of 2.7 per cent every year. This impressive growth gives rise to countless real estate opportunities for investors of all shapes and sizes. To be truly successful you have to understand your commercial tenants and tailor your offering to fit their unique needs.
How can that be done?
Accessibility and location
Looking purely at a space's square metreage is a mistake: you should be considering only useable/functional space.
Even the perfect space would be completely useless if it's tucked away where no one can see it. For that reason when it comes to retail it's usually advisable to buy in a centre that's already established and has high visibility - think Capalaba, Gympie Road, Kessels Road.
Next consider accessibility. Come Saturday, Sunday and other peak retail times your tenant will need sufficient car parking for their customers and will want to ensure that the space is as easy as possible for them to access. Last of all consider signage opportunities. Is there space for branding and advertising outside the building?
Useable space is key
Looking purely at a space's square metreage is a mistake: you should be considering only useable/functional space. Tenants can't properly furnish and use pokey, poorly designed spaces with narrow hallways and weird shapes and sizes. Since rent is generally paid by the square metre, any space they can't use is effectively dead rent which is something no tenant wants.
When buying a property you need to understand how a potential tenant will fit into a space. Try to find something with an open and uniform shape and size as odd dimensions will turn the vast majority of tenants off.
Considering your tenant's unique needs
Online retailers are taking a bigger slice of the pie. A $21.65billion dollar slice last year, according to NAB data.
Every tenant needs something different. For example, service stations and fast food retailers often prefer to be on the side of the incoming lane to catch people on their way home from work and school. No one wants to eat KFC or top up with gas at 8am when they're late for work but catch them at 5pm and you're in with a chance.
Similarly if you're buying in a hospitality area consider the way that people like to eat and drink here in Queensland. Thanks to our sweltering climate, al fresco dining areas are increasingly important for most restaurants, cafes and bars. If you're targeting larger retailers roller doors out back for loading stock without disrupting the retail floor is usually important.
Consider the demographics of the area, who your likely tenant will be and do all you can to find a space that will tick as many of their boxes as possible. One thing that is recommended in almost all instances is air conditioning - spaces without it are generally considerably more difficult to lease.
The future of commercial and retail
The above points will always hold true when it comes to retail real estate. However, the landscape is slowly changing and online retailers are taking a bigger slice of the pie. A $21.65billion dollar slice last year, according to NAB data. That represents annual growth of 10.4 per, representing a steady shift in consumer attitudes.
Despite this trend brick and mortar still dominates. In fact, online retail spending was valued at only 7.1 per cent of brick and mortar last year because customers still like to experience things in person. They enjoy quality service and touching, feeling and seeing before they buy.
Considering the rising importance of the customer experience, and factoring those considerations into the decisions you make about your property could be the best way to future proof your investment against the rise of online retail.
